Publications and Insights
World equity markets have risen further as the global economy continues to recover from the latest coronavirus outbreak, and the current upswing looks likely to continue through 2022: Global fund managers remain strongly overweight to growth assets. The two big issues for investors are inflation and monetary policy: It is still not clear whether current sharp rises in prices are largely transitory and linked to COVID-19 disruptions to supply chains, or more permanent.
Like markets themselves, the frequency of such issues tends to be cyclical, sometimes we are bombarded from one day to the next, and at other times we enjoy at least some relative peace and quiet. Our aim in writing these is to share with you our thoughts and assessments of the issues of the day, but to do so in the context of what is relevant to our long-term forecasts. The framework for making such an assessment is always; what impact this issue will have on the amount of income your portfolio generates, the rate at which that income will grow and how the valuation that is applied to your investments will change from now into the future.
While most of us on the east coast remain under stay-at-home orders of some description, collectively the Australian share market has been able to look through that and see the brighter future that lays ahead. We noted that the pre-coronavirus peak in February 2020 was being challenged around the time of the previous update provided in May. Since then, it can clearly be seen that the local market has gone on to regularly set new all-time highs, and that has provided an ideal environment to continue to slowly reduce your portfolio’s exposure to Australian Equities.
Monthly Economic & Investment Market Commentary - July 2021Independant Financial Advisor
In this month’s commentary we will review some of the results that have been announced in the current company reporting season. They are generally quite strong, and many companies have confirmed a robust recovery in earnings for the financial year ended June 2021. This reflects the strong bounce in economic
activity after the initial Covid-19 recession. The recovery in earnings and the better-than-expected economic outcome has in turn supported a restoration of dividends that were previously reduced. In some instances, there has also been a further return of capital to shareholders in the form of share buybacks.
“The world needs a reality check,” according to an epidemiologist working in Geneva for the World Health Organisation. The article quoting her goes on to say: “Around the world, scientists and public health officials fear that the world’s protracted battle against the coronavirus is at a delicate and dangerous moment. Reality checks abound. Thinking back to the onset of the crisis last year, there are several good reasons to be much more optimistic, and for any short-term dips in sentiment and markets to be viewed as an opportunity. A year ago, one effective vaccine against this virus was but an aspirational goal, today we have several vaccines that far exceeded early expectations on how effective they would be.
As a part of our regular deliberations, the Asset Allocation and Investment Committee has been monitoring the world’s progress in protecting its population from Covid-19 with these charts, which show trends in the rate of cases and doses. As with the economic recovery and the rebound in financial markets, there has been varying progress in different countries and some important divergences look set to persist.Independant Financial Advice