February Economic and Investment Update

Published: 17 Feb 2021

2020 saw a rollercoaster of a ride with markets continuing to go up and down. Even amongst the challenges the world faced, global share markets enjoyed strong return over the last quarter.

This can be attributed to a few good news stories towards the end of 2020, the successful development and distribution of the COVID-19 vaccines as well as positive responses to the US election. Brexit in the UK was finally approved and implemented and the successful conclusion of a UK-EU trade deal was agreed.

The market climate

Global share markets rose in January 2021 as prospects for more stimulus in the US offset concerns about surging COVID cases.

Australian shares also performed strongly. Banks and mining shares boosted the Australian market in the last quarter. As we know, it is all about the long term and COVID has demonstrated that there will be extraordinary events that we cannot control, but what we do know is that it is all about the long term and the markets, no matter what is thrown their way, do tend to recover.

Whilst market sentiment is impacted by the COVID outlook particularly in the US and Europe, this is offset by the ongoing economic and monetary stimulus provided by governments and the ongoing low interest rate and low inflation environment. From end of February the vaccines will be rolled out in Australia and this should help significantly in the second half of 2021. With the control of the virus it will allow governments to ease lockdowns in the future, open up the borders and encourage a return to normal economic activity.

The future outlook

2021 kick starts the year with favourable trends. Vaccines for COVID-19 are being distributed, a new US president has been elected and Brexit has been finally approved, meaning that we begin the year with a positive outlook. However, we have no way of knowing what will evolve over the course of this year. There will potentially be periodic outbreaks of the virus in Australia and this will continue to impact on the economic conditions. Consumer confidence is strong and we remain optimistic with Australia now officially out of a technical recession our economy has bounced back and the outlook has improved.

The transition from the pandemic to recovery will ultimately continue to benefit some stocks like resources, industrials, financials and travel related companies. The Australian Dollar is likely to continue to head higher on the back of rising commodity prices and falling US dollar. With less lockdowns and a strong rise in jobs in Australia we are seeing improvements in retail sales.

The outlook for shares around the world is broadly positive. In particular, the sharemarkets in those countries and regions such as Australia, New Zealand, China, Taiwan and other parts of South East Asia are also likely to be relative outperformers as these economies have rebounded quickly, helped by  the control of the virus, along with strong monetary and fiscal stimulus measures. It is expected that central banks around the world will actively seek to keep interest rates low to encourage further investment and jobs growth, with the RBA signalling to maintain low interest rates in Australia until at least 2024 or until we see inflation in the 2%-3% range.

What is Energy Super doing?

Post the onset of the COVID-19 pandemic in March/April 2020, whilst there are many positives at the moment with significant levels of monetary and fiscal policy, the low interest rate and inflation environment  - we remain cautiously optimistic.  Asset valuations across many asset classes remain relatively high, particularly for income producing assets and even with the vaccine rollout there may still be (positive and negative) pandemic related impacts which we haven’t seen yet.

We remain focused on improving investment performance of Energy Super’s investment options and further diversifying Investment options that have investments in asset classes including alternatives, property and infrastructure.

Want to find out more?

There are a number of investment options you can consider, if you would like to access our team for single issue advice at no extra cost, please call 1300 436 374 to speak to one of our financial advisers* today. Or book an appointment online.

*Energy Super offers advice through ESI Financial Services Pty Ltd (ESI FS) (ABN 93 101 428 782) (AFSL 224952), a wholly owned entity of Energy Super.

The information in this article is general information only and does not take into account your personal objectives, financial situation or needs. You should consult a licensed financial adviser to obtain financial advice that is tailored to suit your personal circumstances. For more information on your investments please visit our website www.energysuper.com.au or call us on 1300 436 374.

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