Australian Economy – The Australian economy continues to roll on, with most indicators pointing to a strong level of activity. Unemployment has recovered back to pre-pandemic levels, with job advertisements at levels not seen for over a decade1. The recent Victorian lockdown and slow vaccine roll-out have generated some concern regarding full re-normalisation, but business and consumer confidence remain buoyant.
Global Economy – High vaccination rates in the US and UK and some parts of Europe is likely to mean that the worst is behind. Countries have begun to open up economies and borders, with unemployment in these developed economies heading back towards pre-Covid levels. One of the bigger concerns on the minds of policy makers is the risk of high inflation, with US price levels jumping over the past couple of months.
Investment Markets – May saw yet another positive month for stocks around the world. The Australian market was up around 2%, whilst Chinese equities performed strongly to end the month up almost 4%. Even with a pandemic, Chinese and US equity markets are up almost 50% over the past 2 years, largely driven by extraordinary levels of government spending and associated money printing2.
Outlook – Whilst consumer inflation figures will be keenly watched, it is not clear at what point central banks will look to ease off the printing presses. Interest rate hike hesitancy will likely continue to keep asset inflation running high.
S&P/ASX 200 – 12 months to 31 May 2021
Source: Yahoo! Finance
Footnotes: 1. TradingEconomics; 2. Bloomberg data .