All things market related

 

Coronavirus has continued to be a key focus for both the media and financial markets. The rollout of the Pfizer and other vaccines has provided a much-needed vision towards a “COVID-normal” life. However, new strains and growing case numbers are keeping many countries on high alert with heightened restrictions remaining in place.

Despite COVID causing the greatest market crash in a generation, global share markets have shown their resilience with World share markets ending 2020 with a 13% rise. The ASX surged 45% after March’s low point, and the market closed largely flat for 2020.

 

Australian equity recovery

The recovery of Australian’s equities from the February and March slump has continued in the final months of 2020. The S&P/ASX200 has returned a further 1.3% in December, after a 10.2% return in November, leading to the market ending on a positive for 2020.

 

US politics update

On 6 January while Congress was undertaking the ceremonial task of counting the electoral college ballots for President, pro-Trump demonstrators broke into and ransacked the US Capitol, forcing members of Congress into hiding. This led to many administration resignations, and the second impeachment of President Trump. The higher expected presence of protests and demonstrations due to the political climate in the US will have minimal, if any, market impacts.

The Biden administration are planning a larger pandemic relief stimulus of $1.9 trillion, with the passage through Congress expecting it to be reduced to around $1.2 trillion. Key elements of this relief package will include larger stimulus checks, state aid, small business and rental support, extension of unemployment insurance and an increase in the minimum hourly wage. If these initiatives pass, there is expected to be a large tax hike.

Brexit moving forward

The UK-EU free trade agreement (FTA) was finally ratified, providing long-awaited clarity to impacted businesses. However, the long-term impact of this agreement on the UK economy remains to be seen. Most economic models assume that a more distant economic relationship with the EU will mean lower levels of investment and competition and reduced specialisation, and, therefore, lower long-term growth. The mainstream view is that leaving the EU risks lowering the trajectory of UK growth.

 

Resources

Financial Market Update December 2020

Australian Equity update

Global Economic Outlook

Economic Round-up: US Political Climate

AMP Market Update 15 January