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Farewell fiscal 2020, hello fiscal 2021

Twelve months back, who could have predicted the world would be in the state it’s currently in?  And yet, despite the pandemic-induced turmoil, some world markets are not that far from where they were a year ago.  Here’s a quick look at the year that was.

The US Nasdaq Index continued to deliver a pull-up effect, appreciating 12.1 per cent in the June 2020 half-year and 25.6 per cent for the year. In market capitalisation order, Apple (US$1.58t), Microsoft (US$1.54t), Amazon (US$1.38t), Google (US$0.97t) and Facebook (US$0.65t) were up 81 per cent, 50 per cent, 43 per cent, 29 per cent and 18 per cent, respectively, for the year to June.  For context, the Australian All Ordinaries Index, which has 500 stocks in it, is capitalised at A$2.0t or US$1.38t – the same size as Amazon.

Most other country indices went backwards in the past six months, with the UK FTSE 100 down 18.2 per cent, the French CAC 40 down 17.4 per cent and the Indian Sensex down 15.5 per cent.

The Australian All Ordinaries Index declined 11.8 per cent to 6,000 points. It is interesting to note this Index hit 6,850 points in November 2007, and so many investors have received a return which has been no better than the market’s annual dividend return over the past twelve and a half years.

As those infected from the COVID-19 pandemic approach 11 million globally, readers must be wondering if the sharp retracement rally from equity markets experienced from the late-March lows has been overdone. It seems several “hot spots” are likely to get worse as the Coronavirus task force member (and Director of the National Institute of Allergy and Infectious Diseases), Dr Anthony Fauci, issued a stark warning that daily US infections could rise from 40,000 to 100,000.

For the bulls, interest rates have again tested record lows and many Central Banks appear to be taking a lesson from Mario Draghi, President of the European Central Bank from 2011 to 2019, who uttered the famous words in mid-2012 in response to the European debt crisis, “whatever it takes”. Examples include Central Banks buying the issuance of Government Bonds to fund stimulus efforts.

US and Australian ten-year bonds finished June at 0.66 per cent and 0.87 per cent, respectively. Australia’s cash rate was cut a further 1.0 per cent over the year to at a record low 0.25 per cent and  is now significantly below the “emergency low interest rates” of 3.0 per cent instituted in the middle of the Global Financial Crisis.  Combined with the reduction in dividends from Australia’s major banks, the retirement generation is seeing enormous pressure on their cashflow.

On the commodities front, it was a mixed story with Gold rallying from around US$1,400/oz to US$1,800/oz over the year, while Oil declined nearly one-third from US$58.47/bbl. to under US$40/bbl.  After hitting US$2.10/lb. in March, the copper price rallied back to US$2.73/lb on the stimulus announcements for no net move over the year.

The Australian dollar ended Fiscal 2020 reasonably steady at US$0.69 – and like copper it rallied strongly from its March low of US$0.5750 on the Central Bank stimulus.

  30-Jun 31-Dec 30-Jun 6 months to 6 months to 12 months to
  2019 2019 2020 31-Dec-19 30-Jun-20 30-Jun-20
        % Change % Change % Change
             
Indicies            
All Ordinaries 6699.2 6802.4 6001.3 1.5% -11.8% -10.4%
S&P 500 2941.8 3230.8 3100.3 9.8% -4.0% 5.4%
Nasdaq 8006.2 8972.6 10058.8 12.1% 12.1% 25.6%
Nikkei 225 21275.9 23656.6 22288.1 11.2% -5.8% 4.8%
FTSE 100 7425.6 7542.4 6169.7 1.6% -18.2% -16.9%
Dax 30 12398.8 13249.0 12310.9 6.9% -7.1% -0.7%
CAC 40 5539.0 5978.1 4936.0 7.9% -17.4% -10.9%
Shanghai Composite 2978.9 3050.1 2984.7 2.4% -2.1% 0.2%
Hang Seng 28542.6 28198.8 24427.2 -1.2% -13.4% -14.4%
Sensex (India) 39394.6 41330.1 34915.8 4.9% -15.5% -11.4%
NZ50 Gross 10501.1 11491.9 11451.1 9.4% -0.4% 9.0%
             
Bonds            
US 10 Year Bonds 2.01% 1.92% 0.66% -0.09% -1.26% -1.35%
German 10 Year Bunds -0.33% -0.19% -0.45% 0.14% -0.26% -0.12%
UK 10 Year Gilts 0.83% 0.82% 0.17% -0.01% -0.65% -0.66%
Japan 10 Year Bonds -0.16% -0.01% 0.03% 0.15% 0.04% 0.19%
Australian 10 Year Bonds 1.32% 1.37% 0.87% 0.05% -0.50% -0.45%
Australian 11am Call 1.25% 0.75% 0.25% -0.50% -0.50% -1.00%
             
Commodities            
Gold (US$/oz) 1409.6 1523.1 1800.5 8.1% 18.2% 27.7%
Oil (US$/bbl) 58.47 61.06 39.37 4.4% -35.5% -32.7%
Iron-ore (US$/tonne) 109.2 91.53 99.43 -16.2% 8.6% -8.9%
Copper (US$/lb) 2.71 2.80 2.73 3.3% -2.5% 0.7%
Wheat (US$/bushel) 5.47 5.59 4.92 2.2% -12.0% -10.1%
             
Currencies            
$US/$A 0.70 0.70 0.69 0.0% -1.4% -1.4%
$A/GBP 1.82 1.89 1.79 3.8% -5.3% -1.6%
$A/EUR 1.61 1.59 1.64 -1.2% 3.1% 1.9%
Yen/$A 75.76 78.34 76.92 3.4% -1.8% 1.5%

 

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