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.

 

Monthly Economic & Investment Market Commentary - June 2021

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“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. 

Quarterly Asset Allocation Update - May 2021

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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

Monthly Economic & Investment Market Commentary - April 2021

 

In the last few commentaries we have had a large focus on the outlook for inflation because a breakout there will likely mean that the rate we use for our risk free rate will increase. Should that happen, and we expect that it will ahead of the next reading for Consumer Price Inflation to be published at the end of July, it will be critical to judge if it is only a temporary phenomenon as the CPI reflects last year’s shut down and this year’s re-opening, or if it represents the start of a more sustained increases in prices.  Over the next few months, it is going to be important that we don’t over-react to a short-term anomaly in the inflation data, and also that we remain alert to the opportunities that this uncertainty might present.

Monthly Economic & Investment Market Commentary - March 2021

 

An anniversary is always a good time for reflection, and whilst we usually focus our analysis on what the future might hold, it is useful to regularly take some time to reflect upon the events of the past. The investment committee does so regularly, but given the extraordinary last year we have all been through such a review also reminds us how extreme the market disruptions of 2020 were. At the very least, as strong economic and market recoveries continue, it also reminds us just how broad the set of possible outcomes is when thinking about something as complex as the global economy, and in turn the financial markets from which we build the exposures in your portfolio. 

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Quarterly Asset Allocation Update - February 2021

 

It is not unusual for the investment world to fall into two camps, but in the last few weeks there has been an especially important version of this unfolding. The current divide centres around the strength of the economic recovery underway, and more specifically if the policies from central banks and governments designed to support that recovery will prove too much, and will lead to the long dormant inflation data heading much higher. Were that to actually occur, the flow on effects across a range of markets and asset
classes are incredibly consequential for portfolio management. 

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Monthly Economic & Investment Market Commentary - January 2021

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The natural inclination from closing the book on an unforgettable year is to look forward to a return to our old normal, though we expect that there will be further surprises to come in 2021, both positive and negative. This brings to mind the quote from Dwight Eisenhower who said, “in preparing for battle I have always found that plans are useless, but planning is indispensable.” The portfolio management plan we expected to follow at this time last year was irrelevant by the end of February, but the process of planning
was more critical than ever in responding to the events of 2020.

Quarterly Asset Allocation Update - November 2020

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The recession in Australia’s economy brought on by the coronavirus has officially come to an end.  When the national accounts data was released recently, the quarterly growth in our economy was ahead of most estimates and represented the fastest rate of growth since the mid-1970s. However, it is important to note that the contraction in the preceding June quarter was of such magnitude that even with this strong recovery there remains a significant gap to the pre-virus level of output.

Monthly Economic & Investment Market Commentary - October 2020

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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. 

Monthly Economic & Investment Market Commentary - September 2020

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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?

Quarterly Asset Allocation Update - August 2020

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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. 

Monthly Economic & Investment Market Commentary - July 2020

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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.

Monthly Economic & Investment Market Commentary - June 2020

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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.

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Quarterly Asset Allocation Update - May 2020

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So, are we out of the woods? Is it onwards and upwards from here?

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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.

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