Joint Statement by Baillieu Limited Chairperson David Trude and Managing Director Gavin Powell

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The global recovery pulse: stronger than expected

Following the COVID-19 driven sharp declines in economies and equity markets in March-April 2020, the key now is the signs of progress toward recovery in the leading global economies and Australia, and their implications for markets.

China’s 2Q20 GDP and June data points to a V-shaped recovery led by property and infrastructure investment. This has been good news for Australia’s commodity exports, as well as emerging market equities. Looking ahead, this picture should continue, particularly whilst China’s exports and consumer spending remain under pressure.

In the US, the recovery in June retail sales, housing indicators and the ISM purchasing managers’ surveys have been V-shaped. Looking ahead, the rising number of COVID-19 cases is denting confidence and should prove a headwind (Figure 1) – though, so far, consumers and markets have proven very resilient.

In Europe, where the data lags behind, the downturn has been deeper, and the recovery is earlier stage. The benefits of reopening, aggressive monetary stimulus and limited second-round effects are yet to be seen.

In Australia, the recovery appears strong. Business confidence and retail sales have rebounded strongly and sit above pre-COVID-19 levels. Home approvals and exports have been resilient. If Australia replicates its late-March success by containing Melbourne’s second wave, the V-shaped recovery should resume.

Download the Full Report below for a detailed discussion of the investment implications.

 

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