Australian Economy – To no-one's surprise, economic growth for the first quarter of the year in Australia saw a fall of 0.3%, whilst the unemployment rate jump another percent higher1. Overall, retail spending has held up well in Australia, likely owing to the relatively low prevalence of the current pandemic and significant government stimulus.
Global Economy – The global economy is still likely to be nearer to the beginning of the Covid-induced economic downturn than to the end with most countries now in a technical recession (negative GDP growth in March quarter and June quarter). Interestingly, it seems as though the US has been hit significantly hard by the downturn, with the US unemployment rate tripling since February, while most other developed economies have only seen an increase of 20-30%. This is despite record levels of government stimulus looking to prop up the US economy1.
Investment Markets – The unprecedented support from governments around the world has at least helped markets to rise above the pandemic, with most equity markets continuing to rebound strongly around the world. Even though most economies will have shrunken by around 15% for the first 6 months of the year, the world of equities which is generally leveraged to economic growth, is down less so (and only down 4% in the US)2.
Outlook – With the pandemic far from over, it is difficult to clearly see how businesses will perform for the short or long term at the moment. The many Covid-related unknowns (When can business start to reopen? How will consumers respond? How long can governments continue to print money? How will investors respond?) along with some of the other geopolitical dramas going on (US elections, anti-China sentiment, Brexit finalisation), will likely provide equity markets with quite a few surprises over the next few months.
S&P/ASX 200 – 12 months to 30 June 2020
Source: Core Equity Services
Footnotes: 1. TradingEconomics; 2. Bloomberg data .