skip to Main Content
EWFP Market Wrap Image

Market Wrap January 2021

Vaccine hopes remained high

  • Global shares rose 3.4% and fell 0.5% in hedged and unhedged terms, respectively. Global equities were weighed down by a rotation into stocks that stand to benefit from coronavirus vaccine rollouts such as oil producers. By contrast names that had gained from the “working-from-home” dynamic such as video conferencing tool Zoom saw its share price fall over 29%.
  • Emerging markets rose 2.5% during December in Australian Dollar (AUD) terms outperforming developed markets.
  • Australian shares outperformed global shares rising 1.2% in December. The market was led by strength from the technology (up 9.4%) and mining (up 8.8%) sectors. Continued strength in iron ore prices following strong Chinese demand and production issues in Brazil (reducing supply) drove names such as Rio Tinto and BHP to 2020 highs.
  • The Australian dollar (AUD) continued to appreciate rising 3.1% against major currencies and 4.8% against the US dollar. Strength in commodity prices, particularly iron ore, was a key driver.
  • Fixed income returns were negative domestically but positive internationally. Long-term government bond yields rose in December as economies are anticipated to recover with coronavirus vaccine rollouts. The Australian market is dominated by government bonds more so than the global bond market. This helped explain the relatively weak returns in the month.

As the vaccinations commence

Globally

  • The second wave of coronavirus cases in Europe and the US escalated further after abating during November led by a new, more infectious strain in the UK.
  • The US Electoral College formally accepted Joe Biden’s victory, paving the way to inauguration on 20 January as the new US President.
  • New US stimulus payments began to be distributed to individuals.
  • The UK exit from the EU was successfully negotiated removing another geopolitical risk from markets.

Locally

  • November jobs growth surprised on the upside with the unemployment rate falling to 6.8%, down from 7% in October.
  • Job vacancies are now exceeding pre-coronavirus levels suggesting unemployment levels will fall further.
  • NAB Business and Westpac-Melbourne Institute consumer confidence surveys remain positive suggesting consumer and investment spending will continue to recover.

Major asset class performance

Asset classes 1 month % 1 year % 5 years (p.a.) %
Australian shares 1.2% 1.4% 8.7%
Global shares (hedged) 3.4% 10.6% 11.4%
Global shares (unhedged) -0.5% 5.7% 10.9%
Global small companies (unhedged) 2.7% 5.9% 10.6%
Global emerging markets (unhedged) 2.5% 7.8% 11.5%
Global listed property (hedged)
2.5% -13.7% 2.9%
Cash 0.0% 0.4% 1.5%
Australian fixed income -0.3% 4.5% 4.6%
International fixed income 0.3% 5.1% 4.6%
Source: Bloomberg & IOOF, 31 December 2020
Indices used: Australian Shares: S&P/ASX 200 Accumulation Index, Global shares (hedged): MSCI World ex Australia Net Total Return (in AUD), Global shares (unhedged): MSCI World ex Australia Hedged AUD Net Total Return Index; Global small companies (unhedged): MSCI World Small Cap Net Total Return USD Index (in AUD); Global emerging markets (unhedged): MSCI Emerging Markets EM Net Total Return AUD Index; Global listed property (hedged): FTSE EPRA/NAREIT Developed Index Hedged in AUD Net Total Return; Cash: Bloomberg AusBond Bank Bill Index; Australian fixed income: Bloomberg AusBond Composite 0+ Yr Index; International fixed income: Bloomberg Barclays Global Aggregate Total Return Index Value Hedged AUD
Please note: Past performance is not indicative of future performance

Currency markets

Exchange rates At close on 31/12 1 month change % 1 year change %
USD/AUD 0.77 4.8% 9.6%
Euro/AUD 0.63 2.3% 0.6%
Yen/AUD 79.5 3.7% 4.2%
Trade weighted index 63.4 3.1% 5.1%
Source: Bloomberg & IOOF, 31 December 2020. All foreign exchange rates are rounded to two decimal places where appropriate.
Please note: Past performance is not indicative of future performance.

Disclaimer: This report has been prepared by the IOOF Research team for RI Advice Group Pty Ltd ABN 23 001 774 125 AFSL 238429. RI Advice Group Pty Ltd is a company within the IOOF group of companies consisting of IOOF Holdings Limited ABN 49 100 103 722 and its related bodies corporate. This report is current as at the date of issue but may be superseded by future publications. The information in the report may not be reproduced, distributed or published by any recipient for any purpose without the prior written consent of RI Advice Group Pty Ltd. This report may be used on the express condition that you have obtained a copy of the RI Advice Group Pty Ltd Financial Services Guide (FSG) from the website. RI Advice Group Pty Ltd and/or its associated entities, directors and/or its employees may have a material interest in, and may earn brokerage from, any securities or other financial products referred to in this report, or may provide services to the companies referred to in this report. This report is not available for distribution outside Australia and may not be passed on to any third person without the prior written consent of RI Advice Group Pty. RI Advice Group Pty and associated persons (including persons from whom information in this report is sourced) may do business or seek to do business with companies covered in its research reports. As a result, investors should be aware that the firms or other such persons may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as a single factor in making an investment decision. This report has been prepared in good faith and with reasonable care. Neither RI Advice Group Pty nor any other person makes any representation or warranty, express or implied, as to the accuracy, reliability, reasonableness or completeness of the contents of this document (including any projections, forecasts, estimates, prospects and returns and any omissions from this document). To the maximum extent permitted by law RI Advice Group Pty, its related bodies corporate and their respective officers, employees, representatives and associates disclaim and exclude all liability for any loss or damage (whether foreseeable or not foreseeable) suffered or incurred by any person acting on any information (including any projections, forecasts, estimates, prospects and returns) provided in, or omitted from this report. General Advice Disclaimer: The information in this report is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this report, you should assess your own circumstances or seek advice from a financial adviser. Where applicable, you should obtain and consider a copy of the Product Disclosure Statement, prospectus or other disclosure material relevant to the financial product before you acquire a financial product. It is important to note that investments may go up and down and past performance is not an indicator of future performance.

For information regarding any potential conflicts of interest and analyst holdings; IOOF Research Team’s coverage criteria, methodology and spread of ratings; and summary information about the qualifications and experience of the IOOF Research Team please visit https://www.ioof.com.au/adviser/investment_funds/ioof_advice_research_process.

Back To Top
×Close search
Search