January 12 2024
Investment Update

December 2023

Rest’s Core Strategy finished both the December quarter and the calendar year strongly, lifted higher by buoyant share markets.

Core Strategy returned 4.10% for the quarter and 9.61% for the calendar year, whilst the Balanced Pension option returned 3.74% and 8.71% over the same periods.

Performance (%)
as at 31 December 2023 

3 months 1 year 10 years p.a. Since inception p.a.
Core Strategy (Super) 4.10 9.61 6.55 8.26
Balanced (Pension) 3.74 8.71 6.19 7.34

Source: Rest, 31 December 2023. Returns are net of investment fees and tax, except Pension which is untaxed. The earnings applied to members’ accounts may differ. Investment returns are at the investment option level and are reflected in the unit prices for those options. Returns for periods greater than one year are annualised. Past performance is not an indicator of future performance. Inception dates are 1 July 1988 for Core Strategy and 13 September 2002 for the Balanced (Pension) option. 

Click here to see the latest investment performance for all options

Market update: improved sentiment

Australian and global shares performed very strongly over the quarter to top off a positive year overall.

Share markets suffered a significant correction in September and October as pessimism over higher interest rates on economies and companies took over. By November the path forward out of higher interest rates and inflation had begun to look clearer, with expectations that further rate rises may not be needed. With inflation and interest rates likely to have peaked, shares rallied very strongly into the year’s end as the gains outweighed earlier falls.

Returns from global shares continued to be driven by technology stocks, as companies linked to artificial intelligence advances maintained their strong outperformance. In Australia, the strongest December rally in 30 years was driven by the resources and banking sectors, both key beneficiaries of the improving growth and rates outlooks.

Most investment markets collectively turned the corner, with listed property and bonds also following suit as interest rate concerns eased after the US Federal Reserve signalled in December that rate cuts might be on the cards in 2024.

Quarterly listed asset class performance

Source: Rest, 31 December 2023. Indices used are Global Shares: MSCI ACWI ex Australia with Custom Tax Index – Net Return, Australian Bonds: Bloomberg AusBond Composite 0+ Index, Australian Shares: ASX300 Total Return Index, Global Bonds: Bloomberg Global Aggregate (AUD Hedged) Index, Cash: Bloomberg AusBond Bank Bill Index, Australian Listed Property: S&P/ASX 300 A-REIT Index, Global Listed Property: FTSE EPRA/NAREIT Developed ex Australia Rental Hedged to AUD, Global Listed Infrastructure: FTSA Developed Core Infrastructure Index Hedged to AUD. 

Outlook for the year ahead

Rate cuts appear to be priced in across a number of markets over the next 12 months, and inflation has come down from its peak in key economies. However, we believe inflation is still likely to remain higher than it was prior to the Covid pandemic. As a result, markets are expected to continue to be highly sensitive to economic data and the impact it has on interest rates. 

Although the outlook for rates and inflation in 2024 looks better overall than it did in 2023, we believe that we are likely heading into a period of persistently higher inflation and interest rates, as well as greater macroeconomic volatility, than we have seen over the last decade or so.

Whilst markets are optimistic, significant rate cuts may not materialise as soon as expected and we may not return quickly to a low-inflation environment. A degree of unpredictability about markets and the future state of economies continues to impact the investment outlook.

At Rest we’ve identified five megatrends we believe will broadly help shape society and markets. These megatrends are decarbonisation, deglobalisation, demographics, digitisation, and debt and central bank policy. Megatrends offer the prospect of longer term investment opportunities that transcend economic and interest rate cycles. 

Our view is as investors we will have to be selective to be successful. We are therefore putting this into practice, and focusing on assets we believe are well-positioned to benefit from these megatrends over the long term.

Our investment strategy also includes exposure to a broader range of diversifiers that have inflation-hedging characteristics, including foreign currency, real assets and natural assets. Examples include our infrastructure assets that support energy transition, which aligns with the decarbonisation megatrend, and our investments in data centres and telecommunications networks that will help underpin ongoing digitisation.

Thinking about what trends and events will shape the future, and investing in them now, helps us position our diversified portfolios to capture returns both now and into the future. Our goal remains to deliver strong long term returns to help you achieve your best possible retirement outcome. 

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