Australian Economy – With Covid cases, for the most part, remaining close to zero Australia started the year with some semblance of normality. Unemployment dropped to an 8-month low of 6.6% with inflation remaining subdued. The reopening of the global economy, especially in the Western Pacific, has also helped Australia's trade surplus get back towards pre-Covid levels (though Chinese retaliatory actions are still hurting specific industries1.
Global Economy – The pandemic has likely reached its largest peak over the past month as the weekly death toll of around 100,000 looks set to fall. The US had a particularly harsh month, with over 95,000 Americans dying from Covid in January alone (not to mention the unnerving scenes on Capitol Hill on January 6th). Across the Atlantic, the UK has also had a month to forget, with Covid deaths skyrocketing above 32,000 for the month (about a 50% higher death rate than in the US) whilst the country also struggled through life officially outside of the EU1.
Investment Markets – The start of the year was relatively good for most developed markets, but some mixed data and the GameStop drama saw most of them finish the month slightly lower. Asian emerging markets were the clear winner, up about 4% for January, continuing their 2020 outperformance2.
Outlook – Focused and temporary lockdowns, along with border closures, are still likely to be a reality in 2021 in Australia and abroad. However, with vaccine rollouts ramping up and the northern hemisphere emerging from its dark winter, the global economy is likely to see some jump in activity. The balance between ongoing macroeconomic stimulus and a heating up economy will likely be a cause for market volatility throughout the year.
S&P/ASX 200 – 12 months to 31 January 2021
Source: Core Equity Services
Footnotes: 1. TradingEconomics; 2. Bloomberg data .