Investments had a strong finish to 2020.
There was some good news for your super last quarter. Markets continued to rally during October to December 2020, helping HESTA’s investment options perform strongly to finish off 2020.
HESTA investment option returns1
Sustainable Growth option
Balanced Growth option
But, it’s important to remember that a surge in market performance reflects a volatile market. As global economies emerge from the COVID-induced downturn back in March 2020, markets are likely to fluctuate as they continue adjusting to our new ways of living and working. That’s why rapid rises in market valuations should be viewed with tempered enthusiasm.
Let’s take a look at what took place during the December quarter in Australia and abroad that has led to this market recovery.
Encouraging progress from vaccine manufactures Pfizer, Moderna and Oxford boosted the prospect of economies around the world re-opening. Planned global rollouts of the vaccine throughout early 2021 gave investors plenty of confidence leading into the close of 2020.
Australia continued its strong COVID-19 recovery, both from a public health and economic perspective. Victoria began easing restrictions in October, and since Victoria accounts for nearly 25% of national GDP, paved the way for a strong national economic recovery. Small spikes in COVID-19 cases nationwide continued to be well managed and maintained by their respective state governments.
In November, the Reserve Bank of Australia outlined a plan to buy $100B worth of Australian government bonds over six months, which enables continued stimulus and a promise of tax cuts for businesses and individuals in October’s budget. Similarly, in December, the US Government passed a stimulus package worth $USD900B ($AUD1.2 trillion). Global markets typically flourish with this type of news and government policy.
Creating a foundation for 2021
The markets rode the wave of positive sentiment around Jo Biden’s victory in the USA election in October. Despite outgoing President Donald Trump’s ill-fated legal challenges on the election result, global markets rallied.
The prospect of the world’s largest economy creating a much-needed COVID-19 plan, extending stimulus packages, investing $2 trillion in renewable energy research and restoring international relations, was more than enough for a weary market to get excited about the year ahead.
1 Past performance is not a reliable indicator of future performance. Investments may go up or down. The returns shown are net of investments fees, indirect costs and taxes.