As the calendar year moves to a close, 2024 will be remembered as a very good year, much like 2023.

The average Balanced Super Fund (70% growth, 30% defensive) provided an 11.8% return for the 2024 calendar year compared with 9.3% for the 2023 calendar year (Bloomberg). Our projected modelled returns for our balanced funds are 6%.

Fortunately, at Future Gen, utilising our investment managers, we were able to achieve comparable returns (or greater) with lesser exposure to growth assets. Our average exposure to growth assets is circa 60%. The aim of the game is to achieve superior returns while taking less risk. That’s why, as I say, it’s been a fortunate time.

Moving forward, the first point I will make is that I do not forecast or make predictions. When clients ask us, we often say, ‘Our crystal ball is broken.’ Forecasting is folly, and frankly, it can’t be done. Words are cheap – results are where it’s at.

So, what have we learned after the last two years? My first point is that ‘trees don’t grow to the sky.’ Receiving a 20% plus share return from global shares and a 33% return from the US S&P 500 is frankly unsustainable. You have to see returns through the standard Bell Curve. If you have returns that are for a prolonged period either outperforming or underperforming, then over time, you have to expect that they will revert to the mean.

What can we expect? Returns should be more constrained while remaining more volatile. Interest rates worldwide are coming down, albeit Australia will be slower. Geo-political risk remains – hot wars continue, and the threat of trade wars is on the horizon. While saying that there is no threat of global recession. This means that returns from cash deposits should reduce – currently at around 5% – maybe down to 4%. Shares have had a good run – probably a time for consolidation, and a correction is not out of the question. Residential housing with interest rates coming off usually runs again, but lending approvals are more difficult. And commercial property should see some improvement as the move to work from home continues to abate.

If I had to sum it up in a word, I would say ‘subdued.’ But I have been wrong before, and I certainly didn’t expect the returns of the last two years!