Market Review

Market Review

➢ Good news is that 63% of Australia’s whole population has now had at least one vaccine dose and in NSW its now 70%
➢ IFM warns that elevated energy prices could begin to chip away at global growth because inflation will persist if energy prices remain high
➢ US has more than a million job vacancies leading to wage rises and annual inflation running at more than 5%
➢ Expectation that US Federal Reserve will ease its purchasing of bonds with the expectation that yield will rise
➢ UK economy growing less than expected, recovery being squeezed by supply shortages and a jump in the cost of goods
➢ Inflation in the eurozone hits its highest level since 2011, 3%, German inflation rises to 4.1%, its highest level since 2008
➢ A standard-sized shipping container through the Panama Canal – from China to the US costs $US54,320 (A$73,935), this time last year it was $8.820
➢ Chinese developer Evergrande missed two bond holder payments in September and carries an extraordinary $400 billion debt, expected to impact China’s property sector
➢ RBA Governor Lowe upbeat – but pushes back against market expectations for the start of rate hikes next year
➢ Australian unemployment rate fell to 4.5%, the lowest in almost 13 years but effective unemployment rate is higher at 6.3%
➢ Australian consumer and business confidence are proving resilient compared to last year likely reflecting more confidence that government support will work

Read the full Market Review here

Market Commentary Financial Year Ended 30 June 2021

Remarkable Returns from Equity Markets Drive Superannuation Fund Returns in FY21

2020-21 (FY21) Financial Year COVD-19, lockdowns and vaccinations could not deter the Australian financial  market from posting another solid year and providing members of superannuation funds with stellar returns.  As we reflect on the financial year, the month of June 2021 is the twelfth month in a row we have seen  positive results for the median balanced fund and double-digit returns for the year ending 30 June 2021.

As in past years, markets had to contend with a range of geopolitical issues, some new while others like Brexit  were all too familiar. The US Presidential election in November 2020 was a major focus for markets. The  strong performance of the US economy at the beginning of the year was expected to favour the incumbent  President Trump. However, the economic damage caused by COVID-19 and the indifferent and inadequate  response by the Trump administration to the worsening health crisis enabled the Democratic nominee Joe  Biden to win the Presidency with most Electoral College votes.

The Brexit saga continued to unfold through the year. After securing parliamentary agreement early in 2020  for the withdrawal, the terms of Britain’s exit from the EU were finally agreed between Brussels and London  and ratified just days before the 31 December deadline. While the agreement means there will be no tariffs  or quotas imposed on trade between Britain and the EU from 1 January 2021, the terms of the 1,200+ page  agreement which cover living, working, trade and a multitude of issues between them are complex and may  present unexpected challenges ahead.

Read the full Market Review here

Overview

  • Government relief spending from the developed economies around the world helped fuel inflation expectations
  • Optimism was boosted by some strong economic data in the US and Europe
  • More than 900,000 US jobs added in March as vaccinations spur return to normal
  • US$1.9 trillion relief package bill signed into law by President Biden
  • European equity markets post strong returns in March
  • Economic data emanating from Europe confirms recovery well underway
  • ‘Third wave’ forces more lockdowns in France and Germany
  • Better-than-expected economic growth meant the UK looks set to avoid double dip recession
  • China’s equity market underperformed as new economy plays suffered amidst tightened regulatory measures
  • Japan’s equity market ended higher helped by improved global growth outlook
  • Government bond yields continued to rise during March. The main drivers were optimism over the vaccine roll-out programmes in the US and UK, as well as concerns about the inflationary impact of the economic stimulus being provided by central banks and governments
  • Corporate bonds held up reasonably well. The more interest rate sensitive investment grade market saw the weakest returns. However, high yield credit spreads continued to tighten
  • The Australian economy has performed better than expected since the onset of the pandemic and much better than some other advanced economies. In its February 2021 Statement on Monetary Policy the Reserve Bank of Australia indicated that the Australian economy had begun to recover in the second half of 2020, much earlier than expected
  • A ship blocking the Suez Canal since 22 February was set free on 31 March. The blocking of the Suez Canal reduced global trade by almost $9 billion a day (12% of daily global trade).

Read the full March 2021 Market Review here

2020 Year in Review

The year 2020 will go down in history as one of the most unprecedented and challenging years of modern times. From the Australian bushfires to COVID-19, Black Lives Matter and the US election, it has been a tumultuous year of change. However, 2020 did finally turn out far better for diversified investors than had been feared when the pandemic hit triggering plunging share markets and deep recessions.

US indices continued to hit record highs as the virus ripped through the country boosted by Thanksgiving get togethers however President Trump’s signature on a massive stimulus bill was enough to stoke markets.

Europe and the UK finally agreed terms for the post-Brexit trade deal. The jury is still out on its content but the cliff-edge no deal scenario was averted just before Christmas.
A drifted dollar and an optimistic outlook also saw emerging market assets cap a good year with some healthy gains. Central banks continued to shower markets with stimulus gifts over the festive period, which provided further confidence to investors looking at riskier assets.

Read the full December 2020 Market Review here

Impact of COVID-19 in October

  • Along with high rates of infection in the US and elsewhere, the surge in infections had economists scrambling to re-assess recovery trajectories which also dented market confidence. Asia was a bright spot as the largest economies there appeared to be avoiding the worst.
  • New deaths in developed countries remain below April highs despite new cases being far higher. However, deaths are rising rapidly in Europe as are hospitalisations which is threatening to overwhelm the health system in some countries.
  • Global equities declined in October. The US presidential election and rising Covid-19 cases in many countries, notably across Europe, were the main focus for investors.
  • The 2020 US election comes at a historic time, with the global economy in the grips of a pandemic, central banks unleashing massive stimulus and trade relationships fraying.
  • The IMF has predicted that China’s economy would expand by 1.9% in 2020 following its rapid recovery from the coronavirus pandemic.
  • Compared with other global equity markets, Australia performed well in October. The US S&P500 Index was down -2.8%, the Nasdaq down -2.3% and the Dow Jones lost -4.6%. European markets were very soft on new lockdowns with the UK FTSE100 down -4.9% and the German DAX tumbling -9.4%.
  • The ASX edged higher +1.9% in October as deal making helped to offset rising COVID-19 infections in the northern hemisphere and amid increasing nervousness around the looming US election.
  • In Australia, consumer confidence continued to rise, NAB business conditions rebounded further to +0.4 in September (previous: -6.2), and business confidence rose to a still weak -3.8 (previous: -8.2). The October Westpac Melbourne Institute consumer sentiment rose 11.9% (previous: +18.0%).
  • Domestically, Governor of the RBA, Philip Lowe, confirmed that based on the local economy’s current outlook, the cash rate is not expected to increase for at least three years.

Read the full October 2020 Market Review here

 

Impact of COVID-19 in September

  • After a summer lull (at least in Europe) Covid-19 returned with force across the continent and in the UK. While increased testing explained away some of the high numbers, governments and markets appeared uncertain how to deal with or contain the pandemic.
  • Governments slowly re-introduced limitations on citizens movements and interactions and brought in new measures to support economies.
  • In the US, the battle between the federal government and states in how to tackle the virus continued. Economy wise, the resurgence seemed to rule out the hoped-for V-shaped recovery as economists quietly moved onto the letter W.
  • US stocks dropped in September as investors worried about stalled fiscal stimulus talks in Washington, the upcoming election, and new coronavirus cases in Europe.
  • In Australia, fiscal and monetary policy should remain very supportive. The government is set to announce new measures at the October budget, and many economists expect that the Reserve Bank of Australia will keep rates steady for the rest of the calendar year 2020.
  • The Australian Government is forecasting the economy to contract this financial year by -1.5%. But this conceals a “record” -7% contraction in June quarter GDP and a gradual recovery from the second half of this year. A big factor constraining growth is that net immigration is expected to be negative resulting in population growth of just 0.2%, the lowest since 1917.
  • For the month, the Dow Jones Industrial Average, which lagged this year slipped -2.3%. The S&P 500 Index -3.9% and the Nasdaq Composite declined -5.2%.
  • The S&P/ASX200 fell -3.7%, which was in line with S&P500 and the MSCI world -2.8% (hedged).
  • There was some modest rotation towards value factors in foreign markets, but this was not seen in Australia due to underperformance of the financial and energy sectors.

Read the full September 2020 Market Review here