Strong performances in both domestic and global share markets were pivotal to this outcome, contributing to about 55% of the growth option mix. Europe took the lead internationally, while the US showed modest gains. January saw Donald Trump commence his second term as President, buoying US market sentiment with his 'America First' policy, although his tariff threats created some market tension.
The latter part of January was marked by fluctuations, especially in the US tech sector, which faced pressures due to the rise of Chinese start-up DeepSeek. DeepSeek's affordable generative AI developments posed competitive challenges to established companies, affecting share prices.
Over the month, developed international shares returned 3.4% when adjusted for currency risk and 2.7% otherwise. Remarkably, Australian shares outperformed with a 4.5% rise, bolstered by limited AI exposure and significant investments in financials. Emerging markets, conversely, underperformed with a modest 1% return, partly due to ongoing tariff disputes. Bond markets experienced minimal growth, with Australian bonds yielding 0.2% and international bonds 0.4%.
Long-term performance metrics remain favourable. Since the start of compulsory superannuation in July 1992, the median growth fund has yielded an average of 8% per year, outperforming the 2.6% consumer price index (CPI) increase over the same period, and delivering a real annual return of 5.4%. Even over the past two decades, despite several financial crises, super funds have provided a 7.2% annual return, significantly surpassing the typical target of 3.5%.
This positive start to the year is a reassuring signal for investors and consumers, indicating sustained super fund growth and resilience amidst evolving global economic dynamics.
