A global investment manager has cautioned that a sustained economic recovery from COVID-19 in Australia may still be far off, with world governments yet to face the challenge of distributing successful vaccines on a mass scale.
In T Rowe Price’s recently released Australia 2021 Market Outlook, the fund manager’s head of Australian equities, Randal Jenneke, said that while there had been “positive news on vaccines” towards the end of 2020, the real challenge for major economies lay in rolling these out to enough of the population to achieve herd immunity.
“The undertaking of manufacturing and distributing vaccines on a global scale is huge and without precedent,” Mr Jenneke said.
“The logistics and financing are not straightforward, and it may well take longer than we currently expect. ‘Herd immunity’ may take a bit longer to achieve, and an early return in 2021 to pre‑COVID conditions could yet prove wishful thinking.”
Mr Jenneke said economic forecasts both in Australia and globally remained “highly uncertain” for 2021.
“One thing we can be reasonably sure of, however, is that, overall, 2021 is likely to be a better year than 2020, with more light at the end of the tunnel as the year progresses,” he said.
“The negative short‑term economic costs and disruption from the coronavirus do not detract from the longer‑term positive case for Australian equities.”
He added that while Australia was in a position of relative success compared with other countries when it came to controlling the virus, the economy was likely to be significantly impacted by continuing international border closures.
However, record-low mortgage rates, combined with government support and the RBA’s bond buying program, were offsetting some of the economic challenges faced, Mr Jenneke said.
He added that the fund manager was favouring high-growth stocks that would do well in a “low-growth, low-inflation and low interest rate world”, such as medical supply company Resmed and gaming group Aristocrat.