Economic e-news – April 2021
19 April 2021
Australian shares continued their upward trend, wiping out the losses made during the height of the pandemic. LGS Chief Investment Officer Craig Turnbull explains.
S&P/ASX 200 recoups losses made in 2020
Australian shares continued their upward trend over the past month, hitting a post-pandemic high and recouping most of the losses recorded during the COVID crunch of 2020.
The S&P/ASX 200 gained almost 4 per cent over the past month to hit a 14-month high and is hovering around 7000 points despite uncertainty over the vaccine rollout, the end of the $90 billion government JobKeeper wage subsidy scheme and the devastating floods across NSW.
The benchmark index is now within striking distance of its record high of 7162 points reached in February 2020 before unravelling due to the pandemic.
Last month’s bond market sell off has subsided, fueling a buying frenzy in global stocks. Investor confidence was bolstered by activity in the US where sentiment was driven by improved optimism around the US economic outlook which helped drive both the Dow Jones Index and S&P 500 to record closing highs.
Locally, there were continuing signs of an economic recovery with strong employment data as the Australian jobless rate fell to 5.6 per cent on the back of 70,700 new jobs. Further, ANZ’s job advertisement series hit a 12-year high in March following a strong result in February. ANZ said growing employment demands elsewhere in the economy would offset overall employment loss.
The Westpac-Melbourne Institute Index of Consumer Sentiment struck its highest level in 10.5 years, underscoring a belief that the economy is firing despite fears that potential job losses would undermine confidence.
At the same time, Reserve Bank Governor Philip Lowe observed the housing market had strengthened considerably and the central bank would “be monitoring trends in housing borrowing carefully and it is important that lending standards are maintained”.
CoreLogic data showed national house prices jumped 2.8 per cent in March for an annualised growth rate of 33 per cent.
Record low rates
Dr Lowe said official cash rates would remain at 0.1 per cent until at least 2024 as the bank’s primary objective was jobs and growth.
Record low interest rates have proven to be a windfall for many companies that benefit from lower loan repayments which in turn improve corporate balance sheets, allowing the payment of dividends to shareholders. This then encourages investors chasing yield to buy shares, driving up prices and boosting superannuation balances as a result.
However, the current interest rate environment may be detrimental to those who have a significant amount of money invested in cash. Investors may see very low, or even negative, returns once fees and costs are taken into consideration.
Consequently, retirement savings may not be growing and could instead be heading in the wrong direction, making it difficult for retirees to find low-risk investments offering a reasonable return.
The month ahead will see the release of the Federal Budget where significant changes to superannuation regulations are often announced.
LGS has been recognised for its sustainable building practices by becoming the first superannuation fund with a diversified portfolio to secure a ‘6 Star Green Star – Performance’ rating from the Green Building Council of Australia. The LGS direct property portfolio was also certified carbon neutral by Climate Active for the third consecutive year.
Read more here.
Rio Tinto is working in partnership with Traditional Owners, host communities and independent groups to strengthen and improve its approach to cultural heritage and community relations. Through our active ownership approach, Local Government Super has been collaboratively engaging with Rio Tinto on this issue
Read more here .
LGS proudly received the 2021 Rainmaker AAA Quality Rating for our Account-Based Pension Plan and LGS Accumulation Scheme products.
Read more here.
Whether you are experiencing financial hardship or just want advice on how to make smart decisions, our financial planners can recommend strategies that work for you, your family and your lifestyle.
Read more here.
Contact us to learn more about how we can help you plan your retirement.