2020 closed out with the same sort of disruption we have seen all year. Our little Covid19 bug played havoc with many Xmas plans all around the country but we hope that the majority got the chance to share quality time with those most important to them. Two of our team made long awaited trips to see family in Victoria but had to quickly reorganise their trips back based on rapidly changing travel warnings. They did get there, so still happy they made the trip, and yes they have been tested on their return – not quite as excited about that…
Investment markets finished the year well but unrest in the US will see some volatility in the coming days. The Democrats now ostensibly control the Senate (the vice president gets the deciding vote) as well as the House of Reps and the Presidency, so some media is talking about radical left wing initiatives and tax increases.
As we mentioned last year, when the dust settles and yes we are seeing a lot of dust at the moment, the Biden administration will have its hands full with the Pandemic and big spending initiatives. This is also what a Trump administration would have had to deal with.
It doesn’t really change our analysts view on 2021 and we need to look past the inauguration, 20 January, in the US to how a Biden Administration will impact markets.
Probably the biggest change will be how a Biden government will manage its China relationship, however Biden has been President elect since December so markets would already have been factoring a lot of this into prices.
We also saw the UK finally Brexit on the 24th of December with the ‘no deal’ exit negotiation coming down to the wire. The EU and UK finally agreed to an 11th hour solution which no one was happy about, which might indicate it was the best solution available. As Larry David is quoted to have said, “A Good Compromise is when both parties are dissatisfied”.
Quick update on Covid19 and the Holiday period.
The Xmas period also saw infection rates in many countries accelerate and as expected the northern winter period has seen a substantial increase. The UK is a particular concern with a more virulent strain and when you hear 50k plus cases overnight and 830 Covid19 related deaths in a day, it does make our northern beaches outbreak look a little less problematic.
At 7 Jan 2021 in Australia, we have no new cases today, no deaths and 300 active cases across the whole country. 76 of these 300 are in Hotel Quarantine. (https://www.covid19data.com.au ) That was despite 486k plus tests being done over the last seven days.
Obviously death rates are the real concern and the impact on hospitals and intensive care. Across Australia in October 2020, we saw 21 Covid19 related deaths – all in Victoria, November saw 1 death in Victoria and December saw 1 death but in NSW. Nothing so far in January. QLD, SA, WA, TAS NT and ACT have seen no Covid19 related deaths since the 25th of April 2020.
Australia has had a very different experience of Covid19 compared to most countries and we are now moving to the vaccine phase.
Announcements from Greg Hunt (Wednesday 6 Jan, 2020)
- Australia has secured 140 million doses of vaccine – which seems a little excessive for a population of 25.7m (as at 30 June 2020), even though most recipients will need two doses.
- 100 Mill of these will come from British pharmaceutical giant AstraZeneca (AZ) (Oxford University developed)
- 1.9 Mill doses of AZ will arrive in Australia in January and another 1.9 Mill in Feb. CSL is developing another 50 Mill doses in Melbourne.
How has this impacted my investments?
I don’t usually share a lot of graphs in these blogs but I think in this case a visual can give a far better overview of what is happening and how markets are reacting to ‘news’.
With all this turmoil you would expect a lot of volatility?
The ASX 200 has seen a bit of this but really nothing to write home about. Despite all the Northern issues and the US concerns over the 30 Days, it is up 0.4%
The S&P 500 (US Index) has actually been surprisingly positive. Up 1.52% over 30 Days
The European markets have been up quite strongly for the month, up 3.4% over the 30 Days
The UK FTSE has been even stronger, up 4.36% over the 30 Days.
So what does this tell us other than your own portfolios are probably quite positive over this short period?
- As usual it is about analysis vs news. Markets like certainty so a Brexit decision was positive for Europe and the UK – no matter what the deal was.
- The US has serious political frictions but markets focus is pricing in which stocks should do well from a Biden administration.
- All countries can see light at the end of the Covid19 tunnel with Vaccines being rolled out and they can starting looking at future earnings.
- Lastly, the next twelve months will continue to see financial stimulus from governments around the world no matter who is in government and that should be positive for investment markets.
That should pretty much bring you up to date and for those of you still enjoying a well-earned break, you can rest assured we are here and keeping on top of things
2021 is already under way and there a lot of positives that we can see, we just have to get through this first bit!
As always if you have any concerns, please talk to us.
Happy New Year!