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.

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