Axiome December update 2020

Markets continued to climb over the December quarter, in line with our view that the environment, on balance, favours risk assets.  Massive fiscal and monetary policy support, Covid-19 vaccine rollouts, and the search for yielding assets out-weighed concerns around a huge surge in Covid cases in Europe and the US.  Into January the rally has continued at the time of writing, as has the rotation from large cap tech stocks to a much broader base of cyclical, small cap and value stocks.

In part this has reflected the US election and Georgia Senate results, which gives the Democratic Party in the US a clearer pathway to enact large scale fiscal policy support whilst Covid-19 still ravages, as well as longer-term infrastructure spending programs

International shares rose around 4.5% in the quarter in NZD terms, whilst NZD hedged shares increased around 11.7%.  These results were sufficient to propel global markets to new highs – the very broad MSCI All Country World Index closing 2020 up over 15% (in USD terms).  Within global equities, MSCI ESG indexes outperformed over the year principally because of their lower exposure to the oil and gas sector, while higher risk small and value stocks out-performed in the quarter.