Publications and Insights
Whilst the current President of the United States may not be willing to do so, there has been a very strong sense that just about everyone other than he and his supporters want to put the US election behind us and move on. Let’s be clear though, the unedifying spectacle of not conceding and not ensuring an orderly transition only drags on because of the delusion of one man. A delusion that continues to be indulged by his party and significant elements within the media. The electoral college margin for President-elect Biden will be identical to that which President Trump secured in 2016. After that election the result was repeatedly described as an historic, landslide victory.
The world continues its efforts to recover from both the health and economic impacts of the coronavirus, but it must be said with widely diverging degrees of policy support, patience and effectiveness. One of the questions that has been asked many times is why is it that in many countries the share market seems to be doing so much better than the underlying economy? Perhaps the better question to ask though is why should we expect these to have similar performance in the first place?
In our August meeting the committee spent a considerable portion of its discussion considering the intersection of two big uncertainties, and there is an extraordinarily wide range of potential outcomes with very important implications for the global economy, financial markets and your portfolio. As we have outlined previously, these are the progress in dealing with the coronavirus crisis and the upcoming US presidential election.
It will come as no surprise that the top two issues that US voters ranked as very important to them when they consider their vote in the upcoming presidential election were the economy and healthcare. However, any realistic assessment should acknowledge that at this time these two issues cannot and should not be separated. That is to say, there will be no sustainable economic recovery without a successful response to the coronavirus. This applies of course not just in the United States but in every country around the world. On that score, we affirm our view that there are quite significant disparities between different countries’ management of the virus, and therefore we expect to see divergent economic outcomes.
The end of a financial year is traditionally a period of reflection, before we return our focus to the future and the long-term returns forecast from this point hence. In so many ways though these are not normal times, so we will dispense with this review quite quickly, before moving on to discuss the current state of the recovery in terms of the economy, the financial markets and most importantly - your portfolio.
So, are we out of the woods? Is it onwards and upwards from here?
We have been saying for some time that we are progressively becoming a little less cautious and a little more confident about both the economic and equity market recovery in Australia. To be clear, we are still in the woods, but we do seem to be on a well-defined path which will in time lead us into a clearing.