Investment insights

Want to know the stories behind the numbers? We had Chris talk us through the latest market activity and what’s on the horizon:

According to Chris, a range of support measures from the Government and other institutions have helped buoy the Australian market over the last few months.

“The huge amount of stimulus we’ve seen in terms of JobKeeper and JobSeeker, and measures like banks allowing customers to defer their mortgage payments, have all been incredibly helpful,” Chris said.

Recognising this, the Government announced an extension to its stimulus measures in July 2020. JobKeeper has been modified and extended by six months to 28 March 2021, while the extra Coronavirus Supplement for Australians on income support payments such as JobSeeker has been extended to the end of December 2020.

The payments will be reduced, or tapered, through the extension period, with the Government stating this will support a gradual transition to economic recovery.

Philip Lowe, Governor of the Reserve Bank of Australia (RBA), stated on 4 August 2020 that the extension of the stimulus package is a “welcome development”, as support is expected to be necessary for some time.

Similarly, Lowe said the RBA is committed to doing what it can to support jobs, incomes and businesses in Australia.

“Its actions are keeping funding costs low and assisting with the supply of credit to households and businesses. This accommodative approach will be maintained as long as it is required.”

With this in mind, the Board of the RBA chose to leave the cash rate on hold at 0.25% at its August meeting.

However, there was some optimism from Lowe.

“The Australian economy is going through a very difficult period and is experiencing the biggest contraction since the 1930s. As difficult as this is, the downturn is not as severe as earlier expected and a recovery is now underway in most of Australia,” he said.

Markets will also continue to keep an eye on how countries around the world fare as they ease restrictions and start to take steps back towards normalcy.

Countries around Europe, for example, are welcoming each other’s tourists, while some have also opened up their borders to travellers from countries deemed to be relatively low-risk, such as Australia.

While each step is a positive for the market, Chris said the most important will, of course, be a vaccine.

“The potential for a vaccine is a really big positive. If there is a successful vaccine and it can be mass-produced, that will be a big step in helping to get things back on track,” he said.

According to The Guardian, the World Health Organisation (WHO) is currently tracking the progress of over 180 candidate vaccines. While the majority are still in the pre-clinical stage, 25 have progressed to Phase 1 of testing as of 4 August 2020, with small-scale safety trials underway.

A further 17 potential vaccines are in Phase 2, while 7 are currently in Phase 3, undergoing large-scale efficacy trials. This is the last testing phase before a vaccine can be approved.

With the US Presidential election now just a few short months away, Chris said the market will also be keeping a close eye on any announcements from the candidates around policy, and how they influence opinion polls.

Given markets don’t tend to like uncertainty, a run of steady opinion polls over the coming months will help shore up investor sentiment.

Analysis from JP Morgan found there are three key areas of focus around the election that will have an impact on markets.

Perhaps the most important will be each candidate’s roadmap to recovery for the economy in 2021, while the management of the US-China relationship will also be key. Following the agreement of Phase 1 of a long-debated trade deal earlier this year, tensions between the two countries have risen once more as a result of the COVID-19 pandemic.

Analysts also have their eye on progressive policy proposals from the Democratic nominee Joe Biden on issues such as corporate tax changes and the American healthcare system.