Super funds were hit in the market turbulence in the run-up to the US Presidential election, with the median balanced fund down 0.6 per cent for October, according to the latest performance survey from Chant West.

But the overall picture is positive with balanced funds up 2.0 per cent for since July and growth funds up 2.4 per cent. Growth funds fell 0.7 per cent in October.

Return for growth and balanced funds in the first ten months of 2016 stood at 4.1 per cent. “So, with only six weeks of the year remaining, there is a good chance that funds will deliver a fifth consecutive calendar year return,” Chant West’s report read.

Industry funds and retail funds performed equally over October. But for the financial and calendar years, industry funds have outperformed, as this table shows.

Chant West research also highlights the different performances of growth and balanced options.

Growth options outperform over the longer term but balanced options largely deliver the stability over the rate of inflation they promise investors.

 “The nervous mood in financial markets continued in October. The most immediate concern was the outcome of the US election, while the future of global interest rates and the consequences of Brexit still prey on investors’ minds,” said Chant West director, Warren Chant.

The Trump Factor

“We now have clarity on that first issue, of course, with Donald Trump coming away with a shock victory. However, along with his victory comes much policy uncertainty,” he said.

“So far, stock markets around the world have, for the most part, taken Trump’s victory in their stride. Defying predictions of a major slump, shares fell as the result became clear but then reversed direction and rose strongly,” Mr Chant said.

However, in the bond markets its a different story. Bond prices have taken a hit as interest rates spike on the belief the Trump  administration will follow through on its promises to spend up big on infrastructure while cutting taxes.

“Rising bond yields are generally unfavourable for property and infrastructure, and we have already seen significant falls in the value of REITs and listed infrastructure,” Mr Chant said.

The US Federal Reserve’s open market committee has earlier this month signalled that the case for an official US rate rise has strengthened and Fed chair Janet Yellen reinforced that view on Thursday in an US in an appearance before the Congressional Joint Economic Committee.

Dr Yellen in her testimony said the central bank would adjust its economic and interest rate outlook as required. A rate rise, she said, could well become “appropriate relatively soon”.

“The evidence we’ve seen since we met in November is consistent with our expectation of strengthening growth and an improving labour market,” she said.

“I do think the economy is making very good progress toward our goals.”

“However, given Trump’s election victory, a rate rise in December is by no means a certainty,” Mr Chant said.

While the timing of any rate rise is capturing the attention of the markets at present, far more important will be the pace at which interest rates increase over the next few years and what that will mean for inflation.