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3 Minute Economic Summary: November – December 2020

Article By Adam Hurwood | | Financial Planning
  • Markets were a sea of green in November as they rallied 10% in a month within Australia and the US. This is a record month for November and was sparked initially by the Biden presidential win which provided more certainty leading into next year.
  • It was further kicked along by daily positive vaccine announcements as well as the recent rollout of vaccines in the UK and imminent rollout around the rest of the northern hemisphere.  The Australian market is now positive for the calendar year, recovering all of the panicked selling in the March quarter with onset of Covid lockdowns.
  • Almost everything went up, however it is important to note that some of the recovery stocks and markets such as Australia, Mining and property are starting to bounce more than the Tech stocks on the expectation of better growth prospects in 2021.
  • Equity markets are currently disregarding the increase in infection rates as winter hits in the northern hemisphere and are looking forward to the New Year and beyond, on the expectation that life returns back to normal and there is an economic recovery.
  • In Australia, with Victoria now coming out of lockdown there is a level of optimism as we return to normal and with significant stimulus coming from the government and the reserve bank, we have now come out of recession. The stimulus will also provide a massive boost into 2021, supported by the rise in a number of our key commodities being Iron Ore and Coal which will provide a boost to local companies and the government budget.
  • As predicted for a number of months, our currency has gradually increased, and now sits at 75c against the US dollar with the expectation for further growth. We also expect that the Australian economy and our market will do better than the rest of the world on the back of our better Covid response and the lift in resource prices.  Australia will continue to benefit from the massive infrastructure and construction spending that is occurring in China and now the rest of the world.
  • Our interest rate whilst not as low or indeed negative as they are in many parts of the world are still very supportive for companies but also residential property which has helped keep our property market steady and is up 2 percent and we expect will go higher next year. This again will be important for our economy but also banking stocks and the net wealth of the population leading to their ability to spend. As we expect interest rates to stay low for most of next year, this provides a strong backdrop for our economy and markets in 2021.

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