Annual Report 2011 - SuperFacts.com

Back to contentsMarket and economicoverview – December2011 yearGlobal economy faltersAs anticipated, the 2011 calendar year proved to bevolatile, though much more so than expected a yearago as the Eurozone debt crisis spread and deepened.Investors remain cautious going into 2012, with still noclear resolution to Europe’s debt woes in sight.The first quarter of 2011 saw global growth gathermomentum and remain resilient in the face of majorpolitical and natural disaster 'shocks' (e.g. the start of theso-called Arab Spring, floods, earthquakes). Nevertheless,with oil prices rising and fears of inflation heightening,some moderation to this growth was expected by theend of that quarter.Consistent with this expectation, global share marketsremained positive in April, but then fell over May andJune. Whereas successful policy interventions in the USand European Union had built the platform for strongergrowth in the second half of 2010, any rebound ingrowth over the last six months of 2011 was expected tobe more modest.However, modest growth would have been welcomed.Instead, the third quarter of 2011 brought extremeand unusual volatility fuelled mainly by sovereign debtissues in the Eurozone; in particular, by heightenedfears of a default by Greece as that country continuedto miss fiscal milestones established as part of earlierbail-out agreements.More broadly, European policymakers struggled to agreeon both an appropriate response and a credible planto address other contagion threats to global financialmarkets. Meanwhile, undercapitalised European banksresponded by hoarding rather than lending money anddeleveraging balance sheets. By the end of the thirdquarter, consensus estimates for 2011 growth had fallen,along with forecasts for 2012.The roller coaster ride for investors continued over thelast three months of the calendar year, with global sharemarkets reacting positively in October to news of apossible breakthrough in the Eurozone debt crisis andrebounding strongly. Global share markets then fell inNovember over uncertainty related to that crisis, butsurged on the final day of the month in response to anagreement by six central banks to reduce the cost forborrowing for banks in emergencies.Global share markets ended the year flat, with investorsremaining cautious as it became apparent that themuch anticipated European Summit would provide noclear resolution for Europe's debt problems, which hadplagued markets for most of the year.Volatile market gives investorsa roller coaster ride in 2011Global outlook for 2012As we enter 2012, despite the latest round of downwardrevisions to economic growth forecasts, there aregrounds for cautious optimism compared with a verydifficult 2011. In Europe, the situation remains delicatewith growth sentiment tempered by risks of a deeperrecession and countries leaving the Euro currency union.In the US, the recent upturn appears better groundedbut longer-term prospects for reducing sovereign debtremain problematic. Meanwhile China's economicfundamentals continue to impress with economicgrowth strong and inflation under control. Australia'seconomic growth has slowed modestly and the ReserveBank has acted to cut interest.Past performance is not indicative of future performanceso care should be taken when reading this information.Lutheran Super Annual Report 20115