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Super returns strong despite volatility

AAP logoAAP 19/12/2016

Superannuation fund performance has rallied since the election of Donald Trump as US president, signalling a turnaround in a tumultuous year for retirement savings.

Most superannuation nest eggs have made it through the year firmly in the black but the rocky ride may not be over yet, financial services group SuperRatings says.

The research group's most recent analysis of balanced-option superannuation accounts - the superannuation option chosen by 60 to 70 per cent of Australians - found that after declines earlier in the year, returns rose 1.2 per cent in November.

That took overall returns to five per cent in the year to November 30.

SuperRatings executive chairman Jeff Breshahan said the November jump was helped by a strong global equities rally after Donald Trump was elected as US president in November.

Mr Breshahan said stocks had slid in the months leading up to the election, but investors turned their attention to the potential impacts of Trump's proposed policies, particularly on higher levels of government debt and spending, and inflation.

"The turnaround in equity markets has been remarkable, and has resulted in a significant boost to superannuation fund balances in November," Mr Bresnahan said.

"The median balanced option has returned an estimated 3.3 per cent in the five months since June and 5.0 per cent over 12 months, underlining the strength of superannuation despite a tumultuous 2016."

SuperRatings research shows that returns were extremely mixed over the year to November, with six months in the black, four in the red and one month flat.

Mr Bresnahan said the figures reflect the high degree of global uncertainty in 2016, including the Brexit vote and US presidential election and mixed domestic economic data, including the 0.5 per cent fall in September quarter GDP.

He warned that although the immediate effect of Trump's win had been positive for returns, the uncertainty remained.

"With the recent rotation into equities and the continued surge in commodities, it appears investors are expecting a more inflationary environment in the future, which will impact wages and prices in Australia," Mr Bresnahan said.

"But it remains to be seen whether recent market gains will be sustained, and we would expect a period of volatility as markets adapt to the changing political landscape."

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