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Investment Review 2020-21

The volatility of the global economy around the onset of the COVID-19 pandemic left many investors concerned about their investments. As we review the financial year that was, we’re seeing a strong return to form in investment markets, after an initial plunge in March 2020. A stimulatory approach from governments around the world, and particularly here in Australia, has meant that some investment markets are even stronger than they were 12-18 months ago. International equities were a bit of a mixed bag, some performing strongly while others disappointed; and commodities share a similar story.

Let’s have a look across a few different investment categories and explore how they fared overall across the 2020-21 financial year, and what it all means for your investments moving forward.

Investment Review – Equities

Starting off locally with Australian equities, for the year ended 30 June 2021 the ASX All Ordinaries climbed an impressive 30.2%, while the ASX 200 went up 27.8% for the same period. Within that, the best-performing sector was consumer discretionary stocks, up 46.1% (i.e. companies that sell non-essential goods and services); followed by financials, up 40.6%. On the other end of the scale, utilities stocks fell by 18.6%.

Looking further afield to international equities, the MSCI World Index (excluding Australia) rose 28.09% for the year ended 30 June 2021. Strong performers worth noting are the United States (S&P500 generating a 40.8% return, primarily due to a strong tech sector); and Korea (56.4% return). The United Kingdom (17.5%) and China (26.4%) offered returns that were below expectations and largely disappointed in the last financial year.

Investment Review – Commodities

Being WA-based, we’re no strangers to the resources sector, and have seen first-hand how its performance can have a profound impact on the economy as a whole. Iron ore prices more than doubled over the year to 30 June 2021, while copper performed admirably, rising 55%. Energy prices went in the same direction, with oil up 80% and thermal coal rising 152.5% – a remarkable increase.

Looking at precious metals – silver, platinum and palladium saw significant value improvements, however gold struggled and ended up down 1.6% for the year.

Investment Review – Real Assets

As we’ve covered in our monthly property market updates, the residential real estate market is red-hot across the country right now with rising prices, reduced stock and record-low interest rates. Homeowners and those with well-placed investments have seen an increase in value of 12.38% for the year in Aussie markets – a refreshing change of pace from the doom and gloom in the market of the past few years.

In the commercial sector, the number of defaults from commercial tenants did not quite materialise to the extent expected, thanks largely to stimulus measures brought in by the government. By the time shopping centres started to fully reopen, many businesses had managed to get through the worst of the COVID-19 storm.

Looking Ahead

Off the back of a strong year for many investors, signs of higher inflation seem to be more transitory than first expected which should only be positive for markets, at least in the short-medium term. Naturally different risk profiles will dictate different investment strategies, however given the significant levels of volatility seen throughout various investment markets across the world in 2020-21 it remains as important as ever to consider a how your wealth is managed for your particular needs.

If you’re ready to step up your investment journey in the new Financial Year, contact the Wealth team at McKinley Plowman to see how we can assist you – 08 9301 2200 (Joondalup); 08 9361 3300 (Victoria Park); or via our website.

Date from AZ Sestante

written by:

Will Lyons

Will has 15 years industry experience working in both consultant and technical positions. Prior to becoming a qualified Financial Planner in Australia, Will worked as a pensions consultant in the UK gaining Advanced Diploma qualifications whilst working there. He has also attained an Advanced Diploma in Financial Planning and has completed the FASEA Financial Adviser Exam and Ethics qualification.

At McKinley Plowman, Will has progressed over the years from our UK Pensions Division all the way through to senior Financial Adviser and now Associate Director within the Wealth team – amassing invaluable experience and knowledge along the way.

Will is a keen cyclist and occasional triathlete that loves going out and socialising with friends.

Will is an Authorised Representative of Fortnum Private Wealth Ltd.