skip to log on skip to main content

Reopening trade and economic recovery remain in focus


14 April 2021

House view





Amidst recent market volatility, the reopening trade should drive markets in the near term. The ANZ Chief Investment Office explains why.

Despite pockets of volatility in the past few weeks, we maintain our view that the reopening trade will continue to drive the financial markets in the near term. While equity valuations are stretched, we believe investors are likely to focus on economic growth and positive vaccine news.

The vaccine rollout has encountered a number of issues including the effectiveness of some vaccines and differing speeds of inoculation. However, these roadblocks should ease over time and provide the opportunity for risk assets to rise further.

As economies reopen fully and the global recovery solidifies the stimulating effects of pent-up demand should fade and risk assets are likely to face a more challenging environment. 

However, this scenario is still some time away and we feel it is slightly premature to act yet.

Fixed income markets have reached an interesting juncture. We saw a significant rise in global sovereign bond yields over the past few months. However, the majority of the rise in yields has been due to inflation expectations rather than rising real yields.

It’s important to keep in mind that while inflation has picked up recently, it was mainly driven by base effects from last year’s decline in prices – these should fade over time.

Want expert investment advice?

Talk to us

Investment outlook in brief

Earlier this quarter we increased our position in risk assets via additional purchases of GREITs and emerging market equities. Growth assets have since materially outperformed defensive assets leading to an even higher exposure to risk assets within our portfolios. Given current dynamics and the pervading risk-on sentiment across markets, we hold this overweight to risk assets, with belief there is still some strength left in the current rally.

Within growth assets, we maintain an overweight to Australian, developed market and emerging market equities. While this position is primarily based on valuations, and we believe sustained inflationary pressures are not likely to materialise in the near term, the current macroeconomic environment calls for some inflation protection.

We remain underweight defensive assets through to our underweight position cash. While the spike in yields has seen some sectors of the fixed income universe become more appealing on a valuations basis, we continue to wait before increasing our existing mild overweight to this asset class. Our preference for fixed income relative to cash is due to the increased yield on offer for a relatively low-risk premium.

ANZ investment strategy positions - April

Investment position
Asset class Reasoning
Australian shares

We hold a mild overweight to Australian shares. The local share market benefited from the rotation towards cyclical assets as heavy-weight ‘value’ sectors in financials and materials outperformed late in 2020.

While there were teething issues with vaccine rollouts domestically, Australia’s handling of the pandemic holds the economy in good stead to continue its positive performance for the remainder of H1 2021.

Despite underperforming global shares in Q1, this asset class provided strong absolute returns for our portfolios. Given the highly cyclical nature of Australian equities, we hold our active position to maintain our exposure to this market segment, which should outperform in the short term. Longer-term we see more favourable opportunities in other developed markets.

Developed market shares

After a minor hiccup in January, developed market shares picked up with strong relative and absolute gains throughout Q1 2021. Value-dominated regions such as Canada, Japan and Europe outperformed growth-dominated regions such as the US, as the ‘value’ trade gathered momentum.

We maintain our mild overweight to developed market shares and seek a balanced approach between the Value trade and other segments.

We retain our preference for the United States and Europe within developed market equities. The US continues to benefit from a strong fiscal stimulus under the Biden administration and an exceptional US Federal Reserve backstop.

Emerging-market shares

We increased our positioning in emerging markets equities midway through Q1 2021 based on dynamics that favour the cyclicality of this asset class, in particular its potential to benefit from the reopening trade and a weakening US dollar.

The asset class underperformed both the broader global equity and domestic equity markets in Q1 2021, dragged lower by Latin America where surging COVID-19 cases and uncertainty about the vaccine rollout weighed on the region.

While slightly more cautious due to the rise in interest rates, overall, this asset class still looks attractive given the likely easing in trade uncertainty and the global activity acceleration in 2021.

Listed real assets1

We maintain a mild overweight to listed real assets. The position is implemented via an overweight to global REITS (GREITs) and mild underweight to infrastructure. We took the overweight position to GREITs based on appealing valuations and as a non-bank exposure to the reopening of the economy trade.

This asset class has started 2021 with solid performance (rising 6.8% in Q1) and has outperformed global equity markets. The position should also provide some protection to portfolios in the event inflationary pressures begin to materialise in a sustained manner.

We retain our mild underweight on listed infrastructure based on our view that there may be strategic opportunities down the road given lower for longer rates scenario and potential fiscal support via infrastructure spending later this year.

International fixed income

Global sovereign bond yields have seen a spectacular rise over the past six months. However, we are wary of the fact that the bulk of the rise in yields had been due to rising inflation expectations as opposed to rising real yields.

Our strategic fixed income duration view of “lower for longer” underpins our continuing overweight position in this asset class.

Australian fixed income

U.S. Treasuries and Australian rates have moved in tandem for the last couple of months or so. While moderately higher yields cannot be ruled out in the short-term given vaccine-driven market dynamics and economic expectations as well as additional fiscal support, structural forces are expected to keep yields somewhat capped and low in general.

We remain overweight Australian fixed income. ‘Aussie’ rates look attractive on many metrics This position is based on the additional yield pick-up, relative to cash, from the asset class.

Australian dollar2

The AUD had a volatile quarter as rising US yields and a tightening in Asian financial conditions stalled its upward trajectory. We maintain the view that the AUD should rise again toward year-end. However, the pathway there has become more nuanced.

We maintain a mild underweight to the AUD as we prefer more developed market foreign currency exposure (in particular the USD) which should act as a form of protection in the event of any market pull-back.



1. Comprises of 50/50 split between GREITs and infrastructure securities.
2. Percentage of developed market and emerging market equities hedged from foreign currency into Australian dollars.
Representative diversified portfolio with 70/30 growth/defensive assets.
As at 1 April 2021.

To discuss what this insight could mean for you, or for a copy of our full investment update, talk to your ANZ Private Banker directly, or contact us below.

You might also like

Amidst inflation jitters focus remains on re-openings and vaccine roll-outs

15 March 2021


Is the sell-off in bond markets an overreaction? Find out more as the ANZ Chief Investment Office explains recent market developments.

Read more

Impact Investing 101

8 March 2021


Investing as a force for good is gaining momentum amongst domestic and international investors. At ANZ Private we understand that growing and protecting our clients' wealth isn’t enough - our clients want to invest to contribute to a more sustainable future for themselves and generations to come.

Read more

Global Market Outlook: Optimism in 2021

25 January 2021


Long-term outlook remains cloudy but 2021 provides rays of optimism for investors.

Read more

Contact us

How to Become an ANZ Private Client

To find out more about how to become a Private Client, share your details here.

Request a call back


Email ANZ Private

Email us with your query and we'll reply to you directly.

Send an email

Call us

Speak to the ANZ Private team directly

1800 316 926

We're available weekdays 9:00am to 6:00pm AEST

Find an ANZ Private office

Our locations across Australia

Find an office

ANZ Private Bankers are representatives of Australia and New Zealand Banking Group Limited ABN 11 005 357 522 (ANZ), the holder of Australian Financial Services Licence number 234527. This document ("document") is distributed to you by ANZ and may not be reproduced, distributed or published by any recipient for any purpose.

The information provided is general in nature only and does not take into account your personal objectives, financial situation or needs. Please consider its appropriateness to you before making any investment decisions. It should not be relied upon as a substitute for professional advice. For any product referred to above, ANZ recommends that you read any relevant offer document or product disclosure statement and consider if the product is appropriate for you. For products issued by ANZ, these documents are available at This document is current as at the date of this publication but is subject to change. The document is provided and issued by ANZ unless another author is specified in the document, in which case it is provided and issued by that author. The views expressed are those of the authors only and do not necessarily reflect the opinions or views of ANZ, its employees or directors. Whilst care has been taken in preparing this document, ANZ and its related entities do not warrant or represent that the document is accurate or complete. To the extent permitted by law, ANZ and its related entities do not accept any responsibility or liability from the use of the information. Past performance is not indicative of future performance and any case study shown is for illustrative purposes only. Neither are a prediction of the actual outcome which will be achieved. Some of this information may have tax implications. We recommend that you seek specialist tax advice on how it may impact your tax obligations, liabilities or entitlements.