Australian Economy – It took the Australian economy a little under 12 months to regain the ground loss due to the initial pandemic panic. Data in June also highlights that along the way the economy has added jobs at a speedy pace, leading to a level of unemployment not seen since prior to the global financial crisis in 2008. This has been driven by ultra-loose macroeconomic settings and a soaring iron ore price. The current winter lockdowns are a concern requiring further stimulus measures from government1.
Global Economy – The US economy has also recovered well with business confidence holding relatively high. This is against a backdrop of sporadic shortages of goods and skilled labour, and also a concerning rise in consumer prices. In the UK, businesses and consumers are also facing the increasing spectacle of shortages, with this aggravated by the additional trade frictions from their exit from the European single market1.
Investment Markets – Despite holding the attention of the world with the running of the Olympics, Japanese equities have not fared well recently, dropping over 5% in July. Other Asian stocks were hit even harder with Hong Kong almost down 10% for the month. Other regions did well, continuing to bounce around near all-time highs2.
Outlook – The recent flight to 'safer' havens has seen developed market bond and equity markets continue to build momentum. This flow of money, along with ongoing money printing efforts, is likely to be building up to unstable levels and may be putting economies at risk from extraneous forces.
S&P/ASX 200 – 12 months to 31 July 2021
Source: Yahoo! Finance