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Printed: 08 December 2022 1:29 AM

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17 Dec 2021 - Hedge Clippings | 17 December 2021
By: Australian Fund Monitors

    

Hedge Clippings | Friday, 17 December 2021

 

Certainty in Uncertain Times

Hedge Clippings' weekly email attempts to strike a balance between a mixture of news, performance, information and insights from a range of fund managers, commentary on what's irking us at present, (generally plenty) and an overview of what might be in the offing on the global economic and political stage. You might think that provides a plethora of opportunities, but trying to capture the week just gone while gazing into the future, and wrapping the result up in just a few paragraphs, is not as easy as it might seem.

Looking back over the past 12 months it has been a pretty extraordinary year - global economies and equity markets should have been devastated by the effects of COVID in 2020, and the fact that disruptions and lockdowns continued, should have done the same in 2021. As it is, growth has been maintained, as evidenced by Australia's unemployment rate falling below 5%, no doubt in part due to a widespread "cash splash" by the government, record low interest rates, and ongoing central bank support.

Equity markets performed well - particularly in the US where the S&P500 had advanced by over 27.92% on a total return basis over 12 months to the end of November, although in Australia the ASX200 more subdued with a total return of "just" 15.48%. Those numbers disguise the performance of individual names and sectors, as evidenced by the fact that while the average actively managed fund on the fundmonitors.com database returned almost 19%, the subset of Australian small/mid cap managers had returned over 34%. It's fair to say that 2021 will go down as a great opportunity for stockpickers - and for that matter, the crypto space, where Bitcoin (currently at $47,000) although trading around 30% off it's high of $68,990, is still 100% above its 52 week low of "just" $22,015.

Looking in the rear view mirror is easy, it is what lies ahead that's difficult. Hence the headline today - "Certainty in Uncertain Times". That may seem a paradox, but if there's one thing certain in the times ahead, it's uncertainty. It's certain that inflation is here, but uncertain as to whether it is transitory or not. It's certain that central bank support will be reduced or withdrawn, but uncertain to what extent, by when, or what the market's response will be. It's certain that interest rates will rise, (and it's even more certain they won't fall) as shown by the UK's lift of 0.25% overnight, but how many times, and by how much, and again how will the markets react?

On the geo-political front the uncertainty is even more certain. Both China and Russia are eager to push their respective boundaries, both militarily and diplomatically, and neither are likely to reduce the invasion threat, even if they don't act. China in particular will play the long game. And finally, on the domestic political front it's looking more and more certain that uncertainty will be the outcome of next year's election, with the prospect of a hung parliament and with independents of various shapes and sizes calling the shots.

And finally, the topic that has dominated nearly every facet of our lives since January 2020, COVID. It seems certain - in NSW in any case - that the Omicron variant will prove as virulent here as it has overseas in the UK, but uncertain if the health and hospital system will see, or be able to manage, the numbers. What also seems certain is that the NSW Premier's decision to ease restrictions on venue numbers, and abandon QR check-in just as cases are increasing, and against his Chief Medical Officer's advice, is probably the dopiest move since Donald Trump declared COVID wasn't an issue.

So there we are! We have almost reached the end of 2021 - and thus the last Friday edition of Hedge Clippings for the year. There'll be one final pre-Christmas edition next Wednesday, and then the FundMonitors.com and Olivia123 teams will down tools, and head off to recharge their batteries. We'd like to wish all our subscribers and readers, and their families, a happy and safe Christmas break, and a healthy and prosperous New Year, whatever that may bring. Thank you for your support, comments and feedback over the past year.


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