Investment markets continue to hold up well, despite the widespread impact of the coronavirus pandemic.
Investment markets remain steady as global economies slowly emerge from COVID-19-induced recessions. But investors are not entirely out of the woods yet with several risk factors contributing to an uncertain outlook.
Australian equities have held up relatively well since mid-year despite corporate half-year earnings declining by 37%, according to CommSec. The financial and industrial sectors have performed poorly over the year to date, but the IT sector and big miners have made strong gains against a harsh economic backdrop. This seems to be changing in the aftermath of the US election, with the market starting to move away from tech stocks.
The national GDP sank by 7% in the June quarter on the back of the global pandemic with economists predicting only a marginal return to growth next year if further COVID-19 outbreaks are kept in check. The Victorian economy was hard hit after a second lockdown to contain the COVID-19 but is now re opening in time for Christmas.
The performance of residential property improved in September with six of the eight capital cities recording a rise in home values, according to CoreLogic. However, falling values in Melbourne and Sydney, which make up approximately 40% of all dwellings, dragged national prices down by 1.1%.
The Federal Government has reduced the second round of JobSeeker and JobKeeper support while the Reserve Bank cut interest rates to 0.15%.
The global economy has also struggled although global equities have performed well.
The US markets traded in a volatile fashion in the run up to the US election, but eventually rallied with a clear Biden victory. There remain grounds for concern, with the coronavirus outbreak not yet under control, uncertainty about control of the US Senate, and trade tensions with China.
The US Federal Reserve has said it will hold interest rates near zero for at least three years and will allow inflation to overshoot its 2% target to bolster employment.
Markets in the UK, western Europe, Russia, India and Brazil all rallied after the US election, but may experience more volatility as they struggle to contain ongoing COVID-19 outbreaks although many countries have also eased restrictions. China has emerged from the pandemic wreckage relatively unscathed and its performance has helped global economic growth improve in recent months.
However, Australia’s relationship with China – its biggest trading partner – continues to deteriorate. China has placed tariffs on Australian barley and banned imports of some Australian beef, although its strong demand for Australian iron ore, which it uses to build infrastructure, continues.
With a quick V-shaped recovery unlikely, savvy investor should remain committed for the long-haul with a diversified portfolio that is aligned to their personal goals.
If you are concerned about current market conditions, please contact our office to speak with an adviser.