Year to Date: ASX200 Back in Positive Territory

The Australian share market erased 2020 losses today following a strong performance on Wall Street on Tuesday which caused the blue-chip gauge to top 30,000 for the first time. Amid a series of recent positive vaccine updates, the US share market was buoyed by hopes that there is a less chance of a contested election:

• The state of Michigan officially certifies the election results for Joe Biden.
• The General Services Administration (GSA) which can ascertain the winner of a Presidential election based on certain criteria and govern under the law for presidential transitions, has recognised Joe Biden as the “apparent winner” and extended around $8 million in transition funding and making other resources available to the Biden transition team.

Source: Bloomberg Terminal

As of writing, the index was up by 0.8% to 6,698.40 points, and rose in positive territory for the year. Most sectors were trading in the green with the energy, financial, real estate and materials index being the best performers with more than 1% gains.

Source: Bloomberg Terminal

After the release of the Federal Budget, Australian shares started to decouple from US and European stocks as investors endorsed the government blitz which boosted confidence. During the month of November, the Australian share market has rallied significantly on the back of:

• The easing of lockdown restrictions in the second most populated state and the second’s largest city in the country.
• The positive vaccine updates coming from Pfizer and BioNTech, Moderna and AstraZeneca.
• The confidence in the Australian economy as compared to other major countries.
• Historically low-interest rates. Even though the RBA slashed interest rates to a historic low, there is a level of reassurance that the lower level of interest rates will stay for a longer period which means that the central bank is not expecting a deterioration in the Australian economy fuelling investors’ confidence.
• The Asia-Pacific Free Trade Agreement has provided another level of confidence at a time of global trade uncertainty. It has also elevated expectations that both countries might initiate some sort of dialogue after the Chinese Communist Party has frozen all communications with Australian ministers.

The pandemic-battered sectors like energy, financials, and real estate were among the biggest gainers on the ASX during the month following the relaxation of lockdown measures. Technology and health stocks which were among investors’ favourites during the pandemic retreated lower during the month.

Source: Bloomberg Terminal

Year to date – the technology and health sector continues to lead with the tech index currently up by a whopping 43%. Despite the improvement in the energy market over the past few weeks, the index is still standing as the worst-performing sector given the fundamental uncertainties.

Source: Bloomberg Terminal