What a year 2020 was! In a nutshell:
- We saw the outbreak of Covid-19, leading to a global pandemic that ground economies to a halt
- In Australia, the ASX200 fell by over 35% in a matter of weeks from its February all-time high of more than 7000
- The government’s generous economic policy and swift handling of the pandemic led us to have a strong and sustained rebound throughout the year
- The Reserve Bank of Australia (RBA) cut interest rates to a record low of 0.10%
- The government announced its massive spending plan, including the implementation of JobKeeper and JobSeeker
2020 was definitely a year everyone wants to forget about, so let’s take a look at what 2021 might have in store for the economy and financial markets.
The Governor of the RBA, Philip Lowe, commented earlier this month that Australia’s response to the pandemic has been strong. He said that the economic downturn resulting from the pandemic was not as bad as initially feared, and the bounce back has been earlier and stronger than expected. This provides us with a better outlook for the next 12 months in comparison to the last 12 months, pending the rollout of vaccines and control of the virus.
From a global viewpoint, Vanguard Investments commented that 2021 will depend significantly on health outcomes worldwide, with the global outlook in the short term not as strong as Australia’s. Their baseline forecast “assumes that an effective combination of vaccine and therapeutic treatments should ultimately emerge to gradually allow an easing of government restrictions on social interaction and a lessening of consumers’ economic hesitancy.” This will largely depend on each country’s ability to roll out vaccination programs, so we consider the recovery path globally to be uneven and varied. This has been evident when looking at the US and the UK – which has seen a disastrous outcome from the virus – whereas China has been able to control the virus and return to pre-Covid levels of economic output.
While we still need to be wary of the pandemic, we are now looking to the future and things regaining some normality. Our investment processes continue to look past the pandemic and we remind our clients that we are invested for the long term. We wish you all the best for 2021!
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