Investment recap: COVID-19 continues to impact markets in the December quarter

COVID-19 continued to impact global economies and markets in the December quarter, although there were signs of recovery and optimism during the quarter.

Global equities and other risk markets continued their recovery during the quarter, fuelled by events such as the rolling out of fiscal stimulus packages in the US and Eurozone, the US election outcome and the finalisation of post-Brexit trade terms between the EU and UK. 

In the US, the S&P500 Index gained 12% in the December quarter. Despite the US experiencing record deaths attributed to COVID-19 over this period, positive sentiment was reinforced by the news of an approved vaccine. The outcome of the US elections also contributed to the equities market experiencing record gains, particularly in November. In addition, a $900 billion government stimulus package was approved by US Congress in December, extending many of the measures included within the original package which was passed early in 2020. The US Federal Reserve also announced that it will maintain current levels of quantitative easing to ensure sustained economic recovery.

While the Eurozone struggled to control the spread of COVID-19, European equities experienced strong gains during the quarter, bolstered by the news of vaccine breakthroughs and the EU leadership’s approval of a €1.8 trillion budget package. However, continually rising infection rates saw many European countries either reintroduce or tighten social and border restrictions.

Also responding positively to vaccine news, UK equities performed well over the quarter, partially reversing underperformance during the initial stages of the pandemic. The UK Government announced an extension of its wages furlough scheme until the end of March 2021, which was well received. UK markets also responded positively to the Brexit trade deal with the EU in late December, with domestic-focused industries outperforming.

In Australia, GDP rose 3.3% in the September quarter, showing the improvement in domestic demand from the easing of COVID-related lockdown restrictions across most of the country. Despite this improvement, overall economic activity remains lower than pre-COVID levels, reflected in a -3.8% decline throughout the year. However, economic momentum continues to trend upward, with ABS figures showing that around 90,000 jobs were created in November, reducing the headline unemployment rate from 7.0% to 6.8%.

The Australian Dollar appreciated against most of the major developed market currencies on the back of stronger investor sentiment. The currency advanced by 7.7% against the US Dollar and 5.3% relative to the Yen.

Australian shares

Equity returns in the domestic market recorded a strong rebound of 13.8% over the quarter, amid wide dispersion in performance across the main sectors. Utilities (-5.4%) and Healthcare (-1.0%) were the weakest, while Energy (26.1%) and Financials (22.8%) led the market. Mid Caps (16.9%) and Small Caps (13.8%) outperformed large cap stocks (13.2%) over the quarter.

International shares

The MSCI World Index ex-Australia (hedged into AUD) rose 11.8% over the quarter. The MSCI Emerging Markets Index (11.3%) outperformed unhedged developed markets (5.8%).

Property

Australian unlisted property grew by 2.3% over the December quarter. 

Fixed interest

Bond markets only delivered small returns over the quarter. The US and Australian 10-year bond yields ended the quarter at 0.92% and 0.97% respectively.

Cash

After cutting the official cash rate to an all-time low of 0.1% in November, the Reserve Bank of Australia made no further changes in the remainder of the December quarter.

We’re here to help

Maritime Super’s investment strategy remains focused on the long term to ride out the volatility we’re experiencing. If you’re unsure about volatility and your super investment, we’re here to help. Call 1800 757 607 to speak with a financial planner.

 

Disclaimer:
The information on this page has been issued by Maritime Financial Services Pty Limited (MFS). It contains general information that doesn’t take into account your individual objectives, financial situation or needs. It’s important to consider how appropriate this general information is in relation to your situation before making an investment decision. We recommend that you seek financial advice before making any decisions regarding your super or investments. The information on this page is current at the time of publishing.

 
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