Australian Economy – As more pandemic-related data filters through, it is becoming more evident that the impact of Covid-19 will be deep, with a lengthy healing process. The unemployment rate in Australia has edged up to 7.5%, despite extraordinary measures to keep workers in jobs1. Ongoing threats of virus resurgence is also hindering the economy from getting back to a stronger level of activity.
Global Economy – Most of the developed world is still near the expected lows of the pandemic in terms of economic health. Unemployment continues to grow whilst early reporting of GDP for the June quarter has shown a large 10% reversal for most developed economies. Some brighter lights include steady data showing that the Chinese economy, which suffered the first wave of the pandemic, has regained much of its economic losses since returning to their new normal1.
Investment Markets – The Chinese share market has outperformed most others over the past 6 months, with investors enjoying strong stimulatory measures from Beijing and the constraining of the virus. The US market also continues to shine, having erased its Covid losses, led by its tech giants. The Australian share market, however, is still well short of its early-2020 highs and is lagging behind most other major stock markets.2.
Outlook – The US election doesn't seem to be a concern for markets, with most solely focussed on seeing an end to the current health crisis. High unemployment does not appear to be abating anytime soon, though it does seem likely that the worst of the economic hit is behind us. Ongoing geopolitical flare-ups and virus resurgence, however, highlight that there is plenty for governments and market participants to be concerned about.
S&P/ASX 200 – 12 months to 30 July 2020
Source: Core Equity Services
Footnotes: 1. TradingEconomics; 2. Bloomberg data .