Invest
8 factors set to impact the economy into 2021
There are a number of major factors that investors should be wary of as the economy and sharemarkets begin their recovery from the COVID-19-driven downturn.
8 factors set to impact the economy into 2021
There are a number of major factors that investors should be wary of as the economy and sharemarkets begin their recovery from the COVID-19-driven downturn.
NGS Super’s chief investment officer, Ben Squires, said in an update that “there remains good reason to maintain a cautious outlook given the risks associated with a second COVID-19 outbreak and the uneven recovery globally”.
And while it is unlikely that mid-March lows would be repeated, markets could still weaken if social distancing measures do need to be retightened, he added, such as what has been seen in Victoria.
While the one-year performance of the S&P ASX 200 was down -11.14 per cent as at 19 June 2020, Mr Squires flagged that the global sharemarket performance – as measured by the MSCI World ex Australia USD – “had recovered most of the losses”, posting a 1.55 per cent improvement.
This may appear to conflict with weak economic activity figures, but the chief investment officer commented that “history shows us that this disconnect between sharemarkets and economic activity is not uncommon prior to a recession end”.
Here are the eight “key” factors the chief investment officer and NGS Super think will have the biggest impact on the economy and sharemarkets over the next 12 months.
1. Improvement in economic activity as social distancing measures become more relaxed
2. The resumption of overseas travel in 2021
- Mr Squires does expect this to remain subdued as additional quarantine measures may impede international travel demand.
3. A permanent shifting of consumer preferences
- According to the CIO, demand for domestic travel could be forever changed, alongside remote working practices and consumption preferences.
4. Volatility will remain high
- Sharemarkets will continue to show movement, with Mr Squires acknowledging that there may be some correction still to come in the recovery phase.
5. Monetary policy will remain open
- Low interest rates can still be expected.
6. Inflation will remain low
- This is because excess capacity in the economy will be absorbed, the CIO said.
7. Unemployment rates to stay high
- This will be the case for the remainder of 2020, but Mr Squires indicated that 2021’s economic activity recovery should aid in employment growth.
8. Globalisation has “peaked”
- “This may lead to changes in supply chain management and company inventory levels and local manufacturing,” Mr Squires indicated, explaining how forward-thinking companies may focus more on resilience rather than cost and efficiency.
RELATED ARTICLES
About the author
About the author
Economy
Australian and Korean leaders meet to unlock billions in new trade opportunities
In a significant effort to bolster economic ties and explore new avenues for investment, Australian and Korean leaders, alongside business executives and government officials, are gathering in Seoul ...Read more
Economy
Australia’s growth beat is real — but it’s the wrong kind for capacity
Australia’s economy outpaced forecasts in the June quarter as households opened wallets and government spending did the heavy lifting, even as public investment sagged. The signal for boardrooms: ...Read more
Economy
Australia’s growth is back—but it’s the wrong kind of strong
GDP surprised on the upside in the June quarter, powered by households and government outlays even as public investment slumped. The Reserve Bank stayed hawkish, signalling that sticky services ...Read more
Economy
Australia's Economic Resilience: Strong GDP growth challenges RBA's policy stance
In a surprising turn of events, Australia's economy has shown greater resilience than anticipated, with the latest Q2 GDP report revealing a stronger performance largely driven by vigorous household ...Read more
Economy
Economist calls for July RBA rate cut following inflation data
An economist from State Street Global Advisors has called for the Reserve Bank of Australia to cut interest rates in July following today's Consumer Price Index data for June. Read more
Economy
GDP data prompts economist to predict faster RBA rate cuts
Australia's latest GDP growth data has come in significantly below expectations, prompting an economist to suggest the Reserve Bank may need to ease monetary policy more aggressively. Read more
Economy
Global markets face turbulent start amid tariff concerns, but outlook remains cautious
Global equity and bond markets have experienced a turbulent start to 2025, primarily due to concerns that a potential tariff-driven trade war could heighten inflation and recession risks. Read more
Economy
RBA may cut rates faster if GDP data disappoints, economists say
The Reserve Bank of Australia may cut interest rates more quickly if next week's GDP data disappoints, economists said following today's consumer price index data for May. Read more
Economy
Australian and Korean leaders meet to unlock billions in new trade opportunities
In a significant effort to bolster economic ties and explore new avenues for investment, Australian and Korean leaders, alongside business executives and government officials, are gathering in Seoul ...Read more
Economy
Australia’s growth beat is real — but it’s the wrong kind for capacity
Australia’s economy outpaced forecasts in the June quarter as households opened wallets and government spending did the heavy lifting, even as public investment sagged. The signal for boardrooms: ...Read more
Economy
Australia’s growth is back—but it’s the wrong kind of strong
GDP surprised on the upside in the June quarter, powered by households and government outlays even as public investment slumped. The Reserve Bank stayed hawkish, signalling that sticky services ...Read more
Economy
Australia's Economic Resilience: Strong GDP growth challenges RBA's policy stance
In a surprising turn of events, Australia's economy has shown greater resilience than anticipated, with the latest Q2 GDP report revealing a stronger performance largely driven by vigorous household ...Read more
Economy
Economist calls for July RBA rate cut following inflation data
An economist from State Street Global Advisors has called for the Reserve Bank of Australia to cut interest rates in July following today's Consumer Price Index data for June. Read more
Economy
GDP data prompts economist to predict faster RBA rate cuts
Australia's latest GDP growth data has come in significantly below expectations, prompting an economist to suggest the Reserve Bank may need to ease monetary policy more aggressively. Read more
Economy
Global markets face turbulent start amid tariff concerns, but outlook remains cautious
Global equity and bond markets have experienced a turbulent start to 2025, primarily due to concerns that a potential tariff-driven trade war could heighten inflation and recession risks. Read more
Economy
RBA may cut rates faster if GDP data disappoints, economists say
The Reserve Bank of Australia may cut interest rates more quickly if next week's GDP data disappoints, economists said following today's consumer price index data for May. Read more
