Global share markets remained strong through March with the global vaccine rollout giving investors’ confidence in the year ahead. The MSCI World Index (a broad global equity index that represents performance across all 23 developed markets countries) returned 4.2% in local currency. A strong rebound in demand for commodities such as iron ore contributed to positive returns in Australia, while New Zealand markets were buoyed by the prospects of a “Trans-Tasman travel bubble” and its economic benefits.
During March, US President Joe Biden unveiled an USD2.25tn US infrastructure plan, dubbed as the “American Jobs Plan”. The eight-year programme will allocate USD620bn to transportation, USD580bn to American manufacturing, USD650bn to initiatives such as cleaner water and broadband and USD400bn towards care for the elderly and disabled.
Supply chains were impacted for six days in March after a container ship called the ‘Ever Given’ was lodged in Egypt’s Suez Canal, showing the world how dependent global trade is on such a fragile piece of infrastructure. The blockage is estimated to have held up USD400m an hour in trade. The alternative trade route between Europe and Asia requires travel around Africa, adding an estimated USD300,000 in fuel costs and 10 days to the journey.
Markets continued to perform strongly in April, with all major markets (with the exception of Japan) showing positive returns. Investors were feeling positive about the strength of the post-pandemic economic recovery. The MSCI World index returned 2.2%. Trans-Tasman shares were positive in April, albeit softer than March, as investors waited to see the impact the Trans-Tasman bubble will have on company earnings. New Zealand and Australian equities were up 1.4% and 2.4%, respectively (in unhedged NZD). Once the highly anticipated Trans-Tasman travel bubble opened, hundreds of travellers reunited with loved ones for the first time since the pandemic began.
Global shares continued their upward path in May as many developed economies continued to reopen, leveraging off surprisingly efficient vaccine rollouts in some countries. Hopes of a complete global reopening in the near term are still minimal, however, as highly infectious Covid-19 variants continue to plague developing nations and bewilder health professionals.
The positive trajectory continued in June, as US stocks reached all-time highs, with the Financial Times stating that the first half of 2021 saw more inflows into Global Equity Funds than the previous 20 years combined. This has been supported by a rapidly recovering global economy and record amounts of monetary and fiscal stimulus. While financial market performance has been positive in recent months, past performance does not guarantee or indicate future performance. The outlook continues to remain uncertain and much depends on the path of the pandemic.
3 August 2021