FIG AVENUE INVESTMENTS

Australian economy

The Australian economy has laboured through regular government Covid interventions over the past 2 years, with business activity in specific sectors struggling with either reduced consumer spending or supply chain disruptions (or both). The latter has become the major concern over the past month (despite reduced government interventions), with the Omicron strain starting to spread rapidly. Even though Australia narrowly avoided a double-dip recession thanks to a small, positive bump in the economy in the June 2021 quarter, there is a chance that Australia could currently be in only its 2nd technical recession in almost 30 years.   

International economy

Despite running at 'full employment' the US economy is starting to struggle from slowing GDP growth and inflation¹. This is set against the backdrop of a surging Omicron and the 'great resignation'. And whilst there has been some indication of ongoing government stimulus in the US, the stalemate over a major infrastructure bill has started to question the limits of US government spending.

Investment Markets

While there have been periods of heightened volatility over the past year, 2021 saw most developed equity markets finish well in the black. European and US markets led the way, both rising by over 20% whilst the Australian share market was somewhere in the middle, returning 13% for the year. This annual returns were echoed in December returns, with US and European markets rising around 5% for the month, while Aussie equities ran about half-speed².

Outlook

The current wave of Covid sickness is likely to peak around most of the developed world later in January, with supply chains and hospitals being pushed to the brink. The hope is that Omicron will push cause more deadlier strains out of existence, whilst also providing a large level of Covid immunity (i.e. the end of the pandemic). In Australia, the government will need to work tirelessly towards a speedy economic recovery, given the impending election, and will be desperate to avoid running a country that is suffering from low activity and high prices.

S&P/ASX200 - 12 months to 31 December 2021