Monthly Agenda November 2020 - Australian Equities
The ASX 200 Accumulation Index has gained more than 10% in the first three weeks of November, turning around the poor performance of the second half of October. While greater certainty has followed the US election, positive developments on the vaccine front has seen a sharp jump in share prices across the board. The sectors leading the way this month are generally those that had performed poorly in the first ten months of the year, with many of these more heavily impacted by COVID-related restrictions. The energy sector has recorded the strongest performance this month, up more than 20%, while the IT sector is up just 5%.
Chart 5: ASX 200 sector performanceEnlarge Source: Bloomberg
With a supportive backdrop of fiscal stimulus, easing monetary policy and falling COVID cases, the ASX 200 recorded another solid month of positive earnings revisions in October. Forward earnings were upgraded by 3.5% for a second successive month, with the last two months the strongest in several years.
Chart 6: ASX 200 monthly EPS revisions turn positiveEnlarge Source: Bloomberg
The improved earnings environment has also translated into better relative performance for the Australian equity market. In the seven-month period from the beginning of March, the ASX 200 Accumulation Index lagged developed markets in all but one month. However, this turned in October, with the ASX 200 outperforming by 5% for the month, while the domestic market has also generated stronger returns in the early part of November.
Chart 7: Australian equities start to outperform (monthly % change)Enlarge Source: Bloomberg