Weekly Market Recap

What’s the worst that could happen?

21/12/2020

Week in review

Australian unemployment rate falls to 6.8%
U.S. retail sales declines 1.1% m/m
Eurozone PMI composite rises to 49.8

Week ahead

Australian retail sales
Australia private sector credit
U.S. durable goods orders

Thought of the week

Markets may not be priced for perfection but they are certainly banking on the good news being delivered. Heading into year end, the question is always, what could go wrong? The smooth distribution of vaccines across the globe is at the top of the list. There are still several distribution hurdles to overcome and there are also issues around allergic reactions and the broad acceptance by the public of the vaccines. Politics will also remain a feature as we watch for speedbumps in the U.S. and the outcome of the Georgia senate race which will decide the final composition of the U.S. senate and may impact the future of fiscal policy. After many years, and countless headlines, Brexit’s time has finally come. It will make a splash but the ripples for most investors outside of the UK will be small. Finally, there is COVID. Case numbers are still growing in Europe and the U.S. and outbreaks are appearing elsewhere. Another wave could dent economic and market confidence. Any of these events could see another spike in market volatility.

Equity volatility never returned to pre-COVID levels
VIX Index

Source: CBOE, FactSet, J.P. Morgan Asset Management, all returns in local currency unless otherwise stated.
Equity price levels and returns: Levels are prices and returns represent total returns for stated period.
Bond yields and returns: Yields are yield to maturity for government bonds and yield to worst for corporate bonds. All returns represent total returns. AusBond Comp is the AusBond Composite 0+ Yr, AusBond IG is the AusBond Credit 0+ Yr both provided by Bloomberg.
Currencies: All cross rates are against the Australian dollar. An appreciation of the foreign currency against the Australian dollar would be positive and a depreciation of the foreign currency against the Australian dollar would be negative.

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