The ASX200 index is up about 12% for 2021, or 16% when including dividends and capital returns. Very low interest rates, government spending and improved household savings has resulted in a boom for the economy and asset prices (shares and property in particular). A world-beating vaccination rate and consumer confidence has seen a transition to a ‘live with Covid’ mindset, although the recent Omicron variant is testing this approach.
Other index movements for calendar 2021:
| · Wall Street | +25% |
| · London | +13% |
| · Japan | +4% |
Commodities were also volatile:
| · Oil | +55% |
| · Copper | +25% |
| · Iron Ore | -30% |
Other observations:
- Record levels of cash held with managed funds ready for deployment
- Mergers and acquisitions are the strongest on record
- About 300 new businesses listed on the ASX this year
- Continuation of work-from-home and disruption to the long-term urbanisation trend
- Transformation to online and the acceleration of digitisation
- Increased public demand for green initiatives
Environmental, Social and Governance (ESG) investing gained significant traction during the year, with larger fund managers demanding a demonstratable strategy prior to investment. Over half of the ASX100 companies are committed to net zero emissions and others are finding it difficult to attract funding for growth without paying a premium for capital. The implications this may have for the longer-term cost of capital should be recognised. Interestingly, there is currently about $A27bn of capital looking to invest in green initiatives.
GDP and employment have returned to pre-Covid levels and Australia is now a global vaccination leader. Consumer confidence continues to grow as does investor confidence. We look forward to seeing what lies ahead in 2022.