But year on year, investment performance remains strong, explains Ed Tomlinson.

The excellent results from last financial year did not continue into the new one, as volatility in global financial markets across August extended into a downturn in September.

The Australian sharemarket experienced its biggest quarterly decline in more than a year. And this performance was mirrored in international markets. Other assets that we invest in, such as bonds, also declined in value.

This caused negative performance across superannuation investments for the first quarter of the 2023-24 financial year. But expanding our view to the past 12 months, our results remain strong, with growth assets such as shares performing well across the period as a whole.

Notes: Data to September 30, 2023. PA = per annum (indicating annualised returns over that period). N/O = product not offered in this time period. The performance returns shown above are calculated net of investment fees and transaction costs and an allowance for tax on investment income. The returns are based on unit prices of each investment option calculated as at the end of the month. Unit prices are based on the latest available investment valuations at the time of calculation, which means they could be one or two days behind the current market indices. Past performance is not a reliable indicator of future performance. *The High Growth – Active option failed the 2022-23 Your Future Your Super performance test.

For full performance results, including our pension options, visit the investment returns section of our website.

There are a few factors working together that are bringing down the value of investments. These include higher interest rates, investors’ increasing doubt over the powerful technology sector and some political instability.

Investor reaction to inflation remains a core reason for negative performance. As inflation remains high – even though there’s signs it’s moderating – it’s becoming clearer the higher interest rates we now experience will remain higher for longer. Previously, investors had some optimism that rates would start to fall in the short term (presuming inflation would come down).

This caused sharemarkets to wilt across August and especially September. The S&P/ASX 200 fell 2.1 per cent from July to September. Sharemarkets in the US also fell, with the tech-heavy Nasdaq Composite index down 3.9 per cent (in local currency terms) across the three months to the end of September. In addition, the bond market returned negative results both locally and internationally.

But inflation isn’t the only reason for this dip. The tech sector is especially important as it was a principal force boosting our investment returns earlier this year. And now, as excitement over artificial intelligence wears off, investors are increasingly concerned about overall future performance of the sector, bringing down its value.

Other economic, political and geopolitical factors also influenced how investors felt and therefore behaved. The Ukraine-Russia war continued, concern over potential US federal government shutdown persisted, and deep worry over China’s economic performance increasingly stressed markets.

We remain uncertain how markets will perform as 2023 becomes 2024. So we remain cautious of the possibility of recession and continue to diversify our investments to manage risk as well as possible.

Ed Tomlinson is chief investment officer at smartMonday