Page 4 - Economic Update - June 2021

ECONOMICS

Quarter in review the virus, but an increase in and lengthening of
restrictions for those countries and regions that
was one of the oddest quarters we’ve seen in did neither well. That trajectory progressed in the
some time. Given all the things happening (or not same fashion as the quarter went on.
happening) in the periphery, you’d be forgiven
for thinking that it wasn’t a strong quarter for
markets, but boy would you be wrong. controversy which saw retail punters (investors)
battle it out against hedge fund managers (the
It wasn’t all plain sailing on the markets front so-called professionals), with retail punters using
with one of the biggest government bond market
of social media, derivatives / leverage, free
To make it all the more confusing, Australian brokerage on trades, government stimulus
listed property fell, global listed infrastructure cheques, and boredom (given government-
and property rocketed higher, Australian large imposed restrictions) to pile into stocks, and
company stocks outperformed small company commodities for that matter, to counter short
stocks, global equities saw the strongest returns positions (ie. betting that a price will fall) from
(almost a years’ worth of return) surprisingly the professional investors. Whilst the latter was
boosted by European equities in contrast to the right to be positioned short given some of the
continuation of lockdowns, all whilst the Aussie rubbish quality of these investments, they largely
dollar retreated a little largely on unexpected US got caught out at their own game. The result
dollar strength. In another big change, there was
a large rotation into Value stocks, including those particularly on an intra-day basis, which led to
stocks left behind or beaten down by Covid- broad investor concerns regarding the stability of
related government-imposed restrictions in 2020. the market.

political front with the Republicans losing both

resulted in a split 50-50 senate. The result
means a likely logjam for legislation requiring a
super-majority which would need a number of

also means that other legislation that can pass
with a simple majority can do so relatively easily
with VP Kamala Harris having the casting vote.
The overall outcome is somewhat vexed in that
it allows a non-Republican controlled senate to
push through greater spending to support Covid

Democrats to ram through some of the most
“progressive” policies the USA has ever seen.
The Democrat party of old is not the same as
the current Democrat party, with that picture
becoming clearer for moderates and liberals as
the quarter went on.

At the same time, we saw the beginnings of an
impressive vaccine rollout by certain countries,
particularly Israel, the UK, and the USA, whilst
the Europeans got swept up in their usual
bureaucratic red tape, though they may have
even outdone themselves this time around,
regarding vaccine ordering and distribution. That
resulted in a lessening of restrictions for those
countries with either strong vaccine rollout or