Quarterly investment update - December 2020
ESSSuper - 02 Feb 2021
Daniel Selioutine, Head of Investments, takes the opportunity to review market activity and the Fund's performance.
Overview
2020 will undoubtedly be remembered as an extraordinary year, beginning with the rapid spread of COVID-19 and ending with humanity reaching new scientific heights to develop several vaccines in record time. Governments and central banks around the world have spent trillions of dollars to support affected citizens as global economies were forced to shut down and re-open to contain the number of new infections.
The December 2020 quarter saw an increase in new coronavirus cases and coronavirus-related deaths across Europe and parts of the U.S., with some major European cities tightening curfews and reintroducing lockdown measures in an effort to control new infections. News that some of the new infections in Europe have been linked to a more infectious and potentially more lethal variant of COVID-19 had little impact on equity markets, which continued to rise in the closing months of 2020.
At the time of writing, 63 million coronavirus vaccine doses have been administered in 56 countries at a rate of approximately 3.2 million doses per day. The U.S. has administered 21 million doses or 51% of their reported stockpile to vaccinate 6.4% of their population. Investors will likely look for early indicators of success in Israel and the United Arab Emirates, who have vaccinated approximately 38% and 22% of their citizens respectively.
The Reserve Bank of Australia (RBA) decided to keep its cash rate unchanged at 0.10% in December 2020, projecting the Australian economy to recover in an uneven fashion towards the latter months of 2021. In the U.S., Congress passed a $900 billion (USD) pandemic relief bill in December to help support the U.S. economy and provide assistance to struggling families. The recently passed bill is expected to be part of U.S. President Joe Biden’s proposed $1.9 trillion relief plan which is yet to garner enough support from Republican senators.
Market performance
Gains in stock prices extended beyond Technology stocks to include previously out of favour cyclical sectors (such as Energy and Materials) as investment markets eagerly anticipated an intensifying roll-out of COVID-19 vaccines. The S&P 500 gained 12.2% (USD) over the December 2020 quarter, bolstering already positive returns to finish the calendar year 18.4% higher. The ASX 300 ended the year up 1.7% (AUD) while the FTSE 100 fell -11.6% (GBP) over the same period. The stark difference in performance reflected stock market composition differences, with the U.S. equity market being more exposed to Technology stocks that performed very strongly during the period.
Bonds generated positive returns over the calendar year to December 2020, with the Barclays Global Aggregate Index (Hedged into AUD) rising 5.1%. Australian cash returned 0.4% over the calendar year, with returns falling relative to prior years as the RBA decreased the cash rate.
Accumulation Plan performance
All of the Accumulation Plan's investment options generated positive returns over three years to 31 December 2020, exceeding their investment objectives.
ESSSuper Accumulation Plan investment option performance
Three years to 31 December 2020 (net of tax, net of fees)
