Last week marked 20 years since the bridge walks of 2000 and Australia’s journey towards a more just, equitable and reconciled nation.¹ National Reconciliation Week came at a time of heightened global outrage at the death George Floyd in US custody – the need for and possibilities of reconciliation was poignantly underlined.
Looking at other events in Australia last week, businesses and unions have put their differences aside and begun together to remove barriers to jobs growth.² This came as Treasurer Josh Frydenberg last week confirmed Australia is in recession, ending 29 years of economic growth. Many sectors have a tough road ahead, not least higher education, as new modelling by Universities Australia revealed the University sector could lose $16 billion in revenue between now and 2023.
Australia is set to the join 16 nations, accounting 40 per cent of global output, in the first step in making an Asian recovery and reconstruction plan.³ The plan coordinates financial, trade, public health and food security policies in the wake of the coronavirus. This is pleasing to see as the pandemic has a caused nations to retreat behind their own borders, but the inevitable recovery will have to be based on global cooperation.
Investors remain optimistic in the face of marked risks
Despite some disheartening riots in the US, continuing pandemic toll and renewed trade war tensions – investors remain somewhat optimistic. As measured by the MSCI World Index, as at 2 June 2020 global share markets were only 11 per cent below their pre-virus highs, while last week the Australian dollar pushed to a four-month high.⁵
According to Head of Equities Jon Fernie, this optimism may be due to “a faster than anticipated reopening of major economies post the COVID-19 lockdown, as well as unprecedented fiscal support and accommodative monetary policies globally which has led to a strong rebound in equity markets.”
“While the economic impact may not end up being as dire as some had initially feared, we remain cautious on the outlook for equities given valuations are close to pre-crisis levels, a COVID-19 vaccine is not imminent and there are looming recession risks from the lockdown fallout," he said.
The next few weeks will be telling whether this optimism can continue to withstand marked risks to this bullish market momentum – some of which may derail recovery plans.
Responsible Investment in times of COVID
Last week the Responsible Investment Association of Australia (RIAA) hosted a webinar: ‘Responsible Investment in times of COVID.’
Working with Rainmaker, RIAA found an emerging body of evidence and data that is strong for the first quarter of 2020, highlighting ESG is continuing to outperform benchmarks. So why is responsible investment weathering the pandemic storm?
Looking at the stocks in responsible investment portfolios such as healthcare and technology - they contribute to the recovery from a crisis. For example, U Ethical healthcare stock GSK has recently joined forces with Sanofi to rapidly scale up manufacturing and this unprecedented collaboration has resulted in the largest vaccine manufacturing capability in the world. Initiatives such as this are in high demand and if successful, will help contribute to the recovery process.
Further to this, there is increased industry pressure for companies to do better. Investors are growing more averse to companies and funds that aren’t contributing positively to society. Corporates can no longer coast without social responsibility and investors are becoming privy to this and holding them to account.
²The West Australian, ‘Reform for jobs growth as recession hits,’ published on 3 June 2020, accessible at: https://thewest.com.au/politics/bosses-and-unions-join-to-talk-up-reform-ng-s-2013351, accessed on 3 June 2020.
³The AFR, ‘Asia Push to Rescue Global Growth,’ published on 3 June 2020, accessible at: https://www.afr.com/policy/foreign-affairs/asia-push-to-rescue-global-growth-20200602-p54ykp, accessed on 3 June 2020.
⁴Nine News, ‘How coronavirus can spread on public transport,’ published on 27 May 2020, accessible at: https://www.9news.com.au/national/how-coronavirus-can-spread-on-public-transport-offices-and-restaurants/77a05fb1-3582-4d04-ac3f-dcda418f248b, accessed on 2 June 2020.
⁵The AFR, ‘Death, mayhem, recession: what can stop this rally?, published: 2 June 2020, accessible at: https://www.afr.com/markets/equity-markets/death-mayhem-recession-what-can-stop-this-rally-20200602-p54ypn, accessed on 3 June 2020.
The market commentary reflects U Ethical’s position at the time of publication and is subject to change. U Ethical reserves the right to make any adjustments to the investment strategy or outlook for all products at any time to reflect major disruptions or changes in the financial markets, as allowed by the relevant governing documents, Product Disclosure Statement, Information Memorandum, or Offer Documents. Past performance is not indicative of future performance. All investments carry risks. There can be no assurance that any U Ethical product will achieve its targeted objectives or rate of return and no guarantee against loss resulting from an investment in any U Ethical product.
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