Investment update for December 2020
Recoveries continue after the economic hits of 2020
International equity markets maintained their strength into 2021. The US equity market rose but underperformed relative to the broad world equity market index this month.
Economic conditions in the US remained strong in December 2020, with the overall economy notching an eighth consecutive month of growth. Business activity in the US services sector continued to climb for the seventh month in a row. Economic activity in the manufacturing sector also grew. The US Federal Reserve extended its asset purchase program and, since the US economy remained far from their employment and inflation targets, officials from the US Federal Reserve committee indicated the central bank will likely continue its bond buying program for quite some time. US stocks have been mixed in response to the recent storm of the House, US senate election results and impeachment proceedings of Donald Trump.
In the UK, the pandemic continued to take centre stage amid the rollout of vaccinations and the spread of a mutated strain. Over the last 12 months, UK equities generally underperformed other international markets due to rising COVID-19 cases and Brexit uncertainty. However, UK equities managed to outperform the world equity index slightly in the month of December as that level of uncertainty on Brexit dissipated somewhat as the UK officially left the EU at the end of the year.
Within the Eurozone, economic activity continues to be weak, equity markets remain resilient, while rates and bonds remain in negative regions.
Emerging market economy equities have outperformed with Korea, China and Taiwan the leading the outperformance for 2020. Technology and healthcare sectors led the performance within emerging markets. Latin American equity markets continued to be weak as many of those countries battle the impact of COVID-19.
Domestically, the ASX underperformed for the year 2020 but performed positively on a FYTD basis. Recent trade tensions with China have been a major focus and likely contributed to Australian equity underperformance. Within the ASX, Technology, Materials and Consumer Discretionary sectors lead the outperformance in the second half of 2020. AREITs were negative for 2020 but performed positively in the second half of 2020. The AUD strengthened over 2020 alongside rising commodity prices, particularly iron ore, with the outperformance strongest against the USD.
Please view our full investment commentary brought to you by our advisers – Frontier – for a more in depth analysis of market conditions this month.
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