CHRIS BURRELL ’ S BLOG
probability of failure of listed companies . Cyclicals have recovered at different rates depending on how the economy and Covid has impacted on those companies . For example , petrol retailers suffered dramatic falls , only to largely recover as it became clear with borders closed and a reluctance to fly interstate , that driving holidays to domestic locations within one ’ s state were a preferred holiday destination . Defensive stocks generally recovered earlier including those with share registry earnings , packaging , hardware retailing and home building including plumbing . Other cyclicals have shown less recovery including oil and gas stocks , banks , large telco ’ s and finance . overseas markets have not corrected to reflect the fact that Covid is not under control . Part of this is due to the coming of successful vaccines , but with 67,000 deaths in the USA in December , the myopic Americans were more focused on a Christmas rally than the hospital reality . The minus is that the increasing number of cases held back further investment overseas , when that would have added to portfolio returns .
Australia 2021
The major determinant of how Australian stocks will perform in 2021 is dependent on the Australian economy . With the exception of the China trade issues , the near eradication of Covid within Australia has seen useful progress in our economic recovery and clearer understanding of how life will return to a new normal . That new normal is a simpler life for many with more time at home , at the hardware store , in the garden , WFH , and reading , some shopping , more internet surfing and for those with reasonable incomes , spending has surprised on the upside .
It is an interesting mental game to understand what Australians are spending their money on . Pleasingly , the restaurant trade has bounced back strongly , as this was one of the most adversely impacted . The building industry is busy both on new homes supported by government programs and tradies have done well all through Covid . However , commercial building is weak . The Jobkeeper program is due to finish at the end of March . The Australian Government stimulus measures have allowed businesses to continue , supported in Queensland by the State Government protocol concerning rent relief for businesses . The transition from these income support measures to further fiscal stimulus will likely see additional infrastructure spending together with some ongoing targeted income support measures .
On the trade front , the China / Australia trade measures are doing irrefutable harm to China ’ s reputation around the world . The wolf warrior diplomacy is a disaster for China . China will need to pivot at some point to a new paradigm . However , this is difficult as their culture is to treat those not aligned with the Chinese Communist Party ( CCP ) as being the minority 5 % who are the baddies in Chinese culture . The human rights issues involving the Uighurs , the treatment of Chinese journalists , and the treatment of Hong Kong all add to the world seeing starkly that China is not the cuddly panda bear Barack Obama was hoping , but rather the Bamboo Curtain is hiding human rights abuses . Hopefully the Honourable Dan Tehan , Australia ’ s new Trade Minister can separate these political issues from mutually beneficial trade . State Government trade delegations should also have a role in building new connections across the trade divide and restoring mutual beneficial trading relationships with China .
The Brexit trade agreement is a real positive for markets as free trade has led to a global increased standards of living .
The breaking of the drought in early 2020 together with beneficial follow up rains has seen a strong rebound in agricultural stocks . Agriculture and the weather was a theme pre-covid which your diarist had considered in previous blogs . The Covid pandemic has reinforced the value in a number of agricultural stocks and this remains a useful theme for 2021 .
While we have seen good recoveries in portfolios , Burrell advisors are continuing to see investment opportunities as do the independent research analysts . Most research houses are seeing the market closing higher at the end of 2021 . However , it is unlikely to be a straight line , with major geopolitical issues within the first four months of calendar 2021 . These geopolitical issues are mostly international , with the exception of the China / Australia trade issues as noted above .
International 2021 This is a complex topic to be more fully considered in later blogs . However , the following points may be useful :
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The first two weeks of January 2021 see the Georgia Senate run-off elections for two Senators . The most probable outcome is that the Republicans will hold the two existing seats , denying the Democrats a clean sweep . The US market appears supportive of this outcome on the ground that a Democrat Congress and Democrat President will follow a centrist viewpoint . By the Democrats not having control of the US Senate , more extreme left wing policies from the Sanders / Warren senators will be denied .
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