Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Cash and Fixed Interest – Quarterly Report OCTOBER 2011 – DECEMBER 2011 Cash & fixed interest are generally considered relatively low risk investments when compared to shares and property. Consequently the expected returns are lower, and modest returns are generally made over long time periods. One thing to bear in mind is inflation. For example, if the interest rate earned on a cash investment is 5% p.a. and the annual inflation rate is 3% p.a., the real return is 2% p.a. Quarter Review Global economic indicators remained broadly indicative of sub-trend growth in the December quarter. Several key themes were apparent, namely the further deterioration in European, emerging market and domestic data, which contrasted an uptake in US data. Ultimately however, headlines and financial markets were driven by developments in the ongoing European sovereign debt crisis. Australian Bank Bill Yields % 5.4 5.2 5.0 4.8 4.6 Dec-11 Nov-11 Oct-11 Sep-11 Aug-11 Jul-11 Jun-11 May-11 Apr-11 Mar-11 Feb-11 Jan-11 Disappointing European economic readings over the December quarter have fuelled consensus expectations of a 4.4 recession in the region in 2012. While a number of interim 4.2 initiatives aimed at providing short term market stability Cash Rate 90 Day Bills 180 Day Bills were announced, the considerable implementation risks 4.0 and questions regarding their effectiveness meant that they were not sufficient to quell market concerns regarding the region’s economic stability. US data exhibited signs of improvement over the quarter. Unemployment fell from 9.0% to 8.6%, its lowest level in almost two years. In China, the combination of tight monetary policy, a property market slowdown and the impact of a slowing global trade cycle on exports are all weighed on growth, with industrial production increasing by its slowest pace in two years. Domestically, economic data continued to soften over the quarter, with unemployment rising to 5.3% and Quarter 3 2011 GDP growth printing below trend. This, in conjunction with the significant downside risks to the global economy and elevated financial market volatility, prompted the Reserve Bank of Australia to cut interest rates by 0.25% in both November and December. Despite this, consumer confidence fell by a significant 8.3% in December to below trend levels, suggesting a possible further slowdown in spending over coming months. Outlook Going forward some fund managers expect markets to remain volatile and to continue trading on headline risk. Uncertainty about the European debt crisis will continue to linger. The uptake in US data is promising, however offset by weaker Chinese data and commodity prices. A further risk factor over the coming months will be the developments in the Middle East, especially Iran. Against this backdrop the same fund managers foresee continued demand for Australian fixed income on a global scale. A note from our legal team This market report has been prepared by Virgin Money Financial Services Pty Ltd ABN 51 113 285 395 AFSL 286869 (VMFS) for The Trust Company (Superannuation) Limited ABN 49 006 421 638 AFSL 235153 RSE L0000635 as Trustee for Virgin Superannuation ABN 88 436 608 094. This information is current as at 31 December 2011. You should consider the Product Disclosure Statement, which can be found on our website. Please note this information does not constitute personal financial product advice, and you may wish to consult your financial advisor before making a decision about whether Virgin Super fits your objectives, financial situation and needs. The information is based on reports provided by Macquarie investment Management Limited ABN 66 002 867 003 AFSL 237492. We haven’t verified its accuracy so we can’t guarantee that it is correct, and accept no liability for inaccuracies, errors or omissions. It is very important note this information is general market commentary only and past performance is not indicative of future performance. The opinions, estimates and other forward looking statements are subject to various risks and uncertainties. It is impossible to predict future events and results, so actual events or results may differ significantly from those mentioned. 148785 QtrRprt IntlShrs_D3.indd 4 27/02/12 2:49 PM