By now, we'd probably all be familiar with most of the effects of the coronavirus pandemic that have come to dominate 2020. From working from home to food shortages at supermarkets, the pandemic has resulted in many changes across society. The same can be said of the investing world. 2020 has seen the S&P/ASX 200 Index (ASX: XJO), as well as markets around the world, have one of the shortest and sharpest market crashes in history, followed by one of the most rapid and enthusiastic recoveries we have ever seen. We have also witnessed the first recession Australia has had in almost three decades.
In Australia, it has been a recession like no other. That's what a piece from Vimal Gor, head of bond, income and defensive strategies at Pendal Group Ltd (ASX: PDL) in the Australian Financial Review (AFR) asserts anyway. Mr. Gor points out that, unlike recessions of the past, the 2020 coronavirus-induced recession has seen an unprecedented influx of government spending, which has cushioned a large portion of the workforce.
Mr. Gor eloquently sums this paradigm up with the following:
Tragically, small businesses, particularly in hospitality, where people… create their own living, have felt the full impact. Public servants and most employees in big business, cashing their guaranteed pay cheques, have actually got richer. Most super funds are back to levels of a year ago and real estate prices are actually higher in many places. Hardly a standard recession.
Property and ASX shares set to benefit
He also commented on the government's response to the recession. He noted that "the RBA [Reserve Bank of Australia] has flooded the system with cash… Not surprising then that when encouraged to invest, not save money, many reach for the only tool they know, property investment."
And it's not just property that Mr. Gor thinks will do well out of this situation. ASX shares also stand to benefit from the RBA's actions, as Mr. Gor states:
Equities also promise to keep rising as the economy opens up. Some earnings may be under pressure for a while but with zero rates, massive fiscal stimulus and an improving economy, the highs from February are within our sights.
So, according to Mr. Gor, as a direct result of the RBA's actions this year, property is set to boom, as is the share market. And he thinks this trend will continue for a while yet, noting that the Treasurer and RBA governor have both said they will "keep their foot to the floor for some time".
So what does this mean for investors? Well, the report concluded with the following:
So we will leave this pandemic with a large proportion of the population richer. As per usual, owners of capital get rescued and policymakers wait for the trickle down.
