Investment update for March 2021

Optimism supported by US$1.9 trillion stimulus package

Continued hopes for an ongoing, rapid economic rebound, buoyed risk assets over the month, with world equities up around 5%. Data continued to show that economic activity is recovering. For instance, trade data showed the international movement of goods returning to near pre-COVID-19 levels (notwithstanding temporary disruptions to trade in the Suez Canal).

The rollout of COVID-19 vaccines continued at differing paces across the world. In particular, vaccination rates continued to be very low in emerging market countries.

Optimism over the pace of the global economic recovery was supported by the US$1.9 trillion stimulus package in the US. The US fiscal response is now estimated at around 25% of GDP, which is significant in terms of direct support from a global perspective. The size and importance of the US economy means the US stimulus will likely have important spill-overs to the global economy. A second stimulus program, focused on infrastructure spending, is likely to have less immediate impact on near-term growth in the US given the timing of expected spending, but will aid over the medium-term.

China also appeared to be growing strongly. However, some recent data showed the level of policy support may be beginning to wane. For example, the growth in total social financing (a measure of credit growth in China) appeared to have peaked.

Australian equities underperformed global markets in the month, weighed down by weakness in resources stocks alongside a softening in commodity prices. Iron ore, which had roughly doubled in price over 12 months, began to soften as important global supply from Brazil resumed.

After rising sharply at the beginning of the year, bond yields were broadly steady in March. Australian government bonds delivered marginal gains in the month, but were still down around 4% over the financial year to date.

Listed real assets, like real estate trusts and listed infrastructure, continued to recover following large losses during the COVID-19 period. Gains in listed real assets were comparable with equities over the month. However, listed real assets generally underperformed equities over the last year given the substantial short-to-medium term disruption COVID-19 caused to assets like airports.

Please view our full investment commentary brought to you by our advisers – Frontier – for a more in depth analysis of market conditions this month.

Read our monthly market snapshot.

We trust you find this information useful in understanding how your AvSuper investment is being influenced and welcome your feedback on how we can improve the information we provide to you.