Growth asset classes have remained buoyant through the first part of 2021, and global monetary policy extremely accommodative, with cash rates at record all time lows across most the developed world. It may surprise some that our view is many growth asset classes remain fairly valued with further (strong) upside likely in the medium term.
- AUSTRALIA – We expect vaccine deployment to provide the pathway to stronger economic recovery and for commodity prices to remain strong through 2021 and beyond
- Retail sales growth was up 10.6% Year on Year to March 2021 supporting our domestic recovery
- House prices continue to surge up 2% in the month of February followed by a further 2.8% in March (fastest increase in 32 years) – our view is that housing remains quite affordable on a cash flow servicing cost basis (our view would change if interest rates were to rise rapidly, however this is not our base case scenario with the RBA clearly stating the cash rate will remain near zero through to 2024).
- Regional house prices are up 11.4% year on year according to Core Logic with anecdotal evidence of a migration from capital cities to regional areas for lifestyle benefits being backed up by regional house price data, indicating strong demand.
- Some 13 years post the onset of the Global Financial Crisis, the Australian Share market benchmark index (ASX200) recently made new highs, taking out the 7,000 level with some momentum – companies in the materials (base metals) and industrials sectors are likely to lead further gains in our view
ASX200 Long-Term chart (as at April 2021)
- UNITED STATES – We expect a strong recovery in the US in the second half of the year
- The progress of vaccination distribution has picked up pace
- 397,000 additional jobs were added in February
- USD 1.9 Trillion fiscal stimulus package passed
- Major US Share Indexes hit new record all time highs during April – US equities remain in a secular bull market.
- CHINA – Domestic consumption will support China’s economic recovery through 2021 and beyond
- China’s target growth rate is 6% in 2021
- Exports jumped 61% Year on Year over January-February
- Chinese equities are down marginally calendar year to date but up 30%+ on a rolling 12 months
Samuel Adams and Glen Orbell