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Market review

A summary of how financial markets performed in the final quarter of 2020:

Global markets

International equity markets continued their stellar rebound in the final quarter of 2020 as the rollout of COVID-19 vaccines raised hopes of a strong economic recovery in 2021. The rally saw a number of markets we track hit record highs, erasing the early 2020 losses. Against this backdrop, the MSCI All Country World Index rose 12.5% over the quarter, in local currency terms.

COVID-19 vaccines begin rollout

The final quarter of 2020 saw two of the highly touted COVID-19 vaccines – Pfizer/BioNTech and Moderna – approved for emergency use by the Food and Drug Administration (FDA). The head of the FDA, Stephen Hahn, said the authorisation of a vaccine was a “significant milestone in battling this devastating pandemic”. By the end of the quarter, more than 30 countries pre-purchased millions of doses. 

Still, amid the optimism of the vaccine rollout, cases, deaths and hospitalisations continued to rise over the quarter, which has now seen more than 1.7 million people die worldwide. Furthermore, a new strain of the virus cropped up, which is thought to be as much as 70% more transmissible. However, leading medical specialists said the vaccine will protect against the new strain. 

Biden wins US Presidential election

In November, former Vice President Joe Biden beat US President Donald Trump to secure the presidency. Biden won 306 of the 538 electoral votes, winning back key swing states in the Midwest in what was a polarising election. The growing partisanship saw a record number of Americans turnout with more than 155 million people casting votes.

In the ensuing days and weeks, the Trump campaign launched a number of legal challenges and demanded recounts, alleging election fraud. However, none of the recounts or legal challenges were successful and President Biden was inaugurated in late-January.


New Zealand market

New Zealand markets finished the year on a high note, with the benchmark NZX 50 recording double-digit gains over the final quarter and finishing the year higher, despite the deep sell-off in March. For the quarter, the NZX 50 gained 11.4%, which was in line with most global counterparts. For the year, the index gained 13.9% and hit a record high above 13,000. 

Labour wins the election by a landslide

The quarter began with the New Zealand Labour Party comfortably winning the General Election, becoming the first party to secure a majority since the country shift to the MMP electoral system meaning it would be able to govern alone. 

Upbeat economic data points to a strong recovery

It was a relatively good three months for economic data. GDP figures for the third quarter showed the economy had a strong recovery out of the recession, with growth rising 14% quarter-on-quarter. Meanwhile, the unemployment rate rose to 5.3%, which was marginally better than most forecasts. And finally, retail sales data showed a whopping 28% rise from the prior quarter, comfortably beating expectations.  

Strong quarter for the New Zealand dollar

The better-than-expected economic data helped the New Zealand dollar rise more than 8% versus the US dollar, trading to its highest level since April 2018. The gains were also aided by a strong ‘risk-on’ environment – a scenario that historically benefits the New Zealand dollar. The currency also recorded gains against the Australian dollar, the Japanese yen and the euro.

 

Source: ANZ New Zealand Investments Limited (ANZ Investments), Bloomberg, Factset.

Market return indices: Global shares (MSCI All Country World Index); US shares (S&P 500 Index); Technology shares (NASDAQ 100 Index); UK shares (FTSE 100 Index); Chinese Shares (Shanghai Composite Index); New Zealand shares (NZX 50 Index); Global Bonds (JPM World Govt Bond Index); New Zealand Bonds (NZX New Zealand Government Stock Index); International listed property (FTSE EPRA Nareit Custom Developed Rental (ex-AU & NZ) Index); New Zealand listed property (NZX Property Index); Australian listed property (ASX 200 REIT Index). Returns are for the quarter, and are based on the stated market indices, shown in local currency terms and are unhedged, unless otherwise stated.

This material is for information purposes only. We recommend seeking financial advice about your situation and goals before getting a financial product. To talk to one of our team at ANZ, please call 0800 736 034, or for more information about ANZ’s financial advice service or to view our financial advice provider disclosure statement see anz.co.nz/fapdisclosure

Past performance does not indicate future performance. The actual performance realised by any given investor will depend on many things, is not guaranteed, and may be negative as well as positive.

ANZ New Zealand Investments Limited is the issuer and manager of the ANZ KiwiSaver Scheme, the ANZ Default KiwiSaver Scheme, the OneAnswer KiwiSaver Scheme, the ANZ Investment Funds, the OneAnswer  Multi-Asset-Class Funds and the OneAnswer Single-Asset-Class Funds.

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