Dear Valued Client,
As we turn the page over and close what has been an unprecedented year, the focus is now on 2021 and 2022 given the prevailing uncertainty across all markets.
A number of new and ongoing developments bear close watching:
- Sydney outbreak containment – this is new and has obvious consequences on the domestic front.
- Global and domestic economies – will they continue to surprise on the upside?
- US Covid – will the re-acceleration lead to harder lockdown and potentially an economic slowdown in the US?
- Vaccine Data- Whilst latest data form Moderna and the China vaccines remain positive a new virus strain has been spreading in the UK. The ability to deliver effective vaccine at necessary scale remains a challenge.
- US Fed and growth in its balance sheet continues to be strong.
- Brexit negotiations appear to be progressing to plan.
- Constrained world trade – China and various trading partners – could potentially result in undesirable outcomes.
- The Australian Economy – Level of uncertainty post full withdrawal of the stimulus in March 2021.
The COVID-19 pandemic has had a stunning impact on the global economy and to a lesser extent, on the local economy.
This in turn has led to a permanent shift in the operating landscape for millions of businesses and to varying degrees, changed all our lives.
On balance, we are cautiously optimistic that progress forward is possible on both health and economic fronts, the Australian economy has maintained improvements in this respect.
In saying that, 2021 and perhaps a couple of years out are likely to experience a degree of volatility given that asset classes (in general) appear to be fully valued, high liquidity appears to have played a part in this outcome.
On reflection, history tells us that this often brings about some uncertainty.
Excessive liquidity by central banks although warranted, can over-shoot and create unintended consequences (asset bubbles). A potential outbreak in inflation, although currently with low probability, is also of concern.
At times like these it is always good to gain a perspective and focus on what we can control and ignore the uncontrollable.
Some of the controllable areas might include:
- Review our financial, estate and personal protection plans.
- Calculate and control our lifestyle costs ( When things don’t add up start subtracting )
- As investments are made, consider the principle of ‘dollar cost averaging’
- Consider Dividend Reinvestment Plan ( DRP)
- Diversification and history are our best friends, reflect and actively rebalance asset allocations
- ‘Cash is king’ as we accumulate wealth, not so in retirement
- Target modest improvements and find many of them
In closing, we would like to take this opportunity and thank you for placing trust in AMCO to provide guidance and certainty during what are unquestionably uncertain times.
We wish you and your family a Merry Christmas and a happy, healthy and prosperous new year.
Danny D. Mazevski
Chartered Tax & Financial Adviser
FIPA CTA FTMA MBA (Un.NSW/SYD) Dip.FS JP