Recession confirmed. Surprise, Surprise!

Hedge Clippings understands that for politicians the "R" word is a double-edged sword. Oppositions love to taunt governments, and governments love to remind the opposition of their own "R" record when in power, while pointing to their own prowess in avoiding them.

Of course, the fact that Australia hasn't experienced a recession in close to 30 years makes the Treasurer's acceptance/admission that we're now in one - while we're still in the June quarter, let alone before we have the numbers that won't be released until September - all the more a confirmation that we're living in extraordinary times.

However, this week's premature acceptance, or capitulation, or however one wants to describe it, was probably a first. Hardly the "recession we had to have" under former Treasurer Keating (self-described as the "world's best" at the time), more one that no government could have avoided under the circumstances, in spite of the efforts they're making, and the billions they're spending, to mitigate its effects.

What is surprising is how long it has taken to accept the inevitability of the "R" fact (or perhaps how long it has taken a journalist to ask the question), given that you don't need to be a student of the science of economics, or the dark art of political speak, to have known the answer.

The real question, which no one knows, is how long the recession is going to last, how deep it will be, how large the deficit will become, and how long - or should that be, how many generations - before the "S" word (surplus) is considered remotely possible. There are millions of Australians who only know of recessions via the classroom or through the media. Going forward, there are millions more who sadly won't live to see another surplus.

None of this should be taken as criticism of the measures that the Federal government, and the State governments of all persuasions, have taken to protect Australians against both the physical and economic effects of the global COVID-19 pandemic. Inevitably there are sections of the community and workforce which have been affected - or benefitted - more or less than others.

That happens. However, taken as a whole, it is difficult not to be thankful (if we weren't already) that we live in Australia, rather than in the US, Europe, or in fact anywhere else in the world. That would include NZ, but understand there may be more than one opinion on that depending on which side of the Tasman one is on.

More importantly, as we're only three months into this disaster (probably more correctly described as a debacle in the US or UK), how we come out of it and how the government manages to wean the country off COVID Welfare, bring us out of the recession, and put us back onto the path to growth, will be key to our collective future prosperity. And don't fall into the trap of thinking that a quarterly bounce in GDP in Q2 or Q4 means we're out of the woods. Getting back to where we were is not going to be an easy task.

Which brings us to the markets and the performance of managed funds. To the end of May, the ASX200 Accumulation Index rose 4.36%, still down -12.7% from December 31, and -6.7% over 12 months. Early days yet, but based on 20% of performances received to date, Australia/NZ managed funds rose by 9.55% in May for an outperformance over the month of +5.19%, and are down just -2% YTD. Over 12 months they are up +4.33%, outperforming the Index by over 10% both YTD and over 12 months.

By itself, a fall on the ASX of only 12% YTD, given the "R" word that is now part of the vocabulary of 30 and 40-year-olds for the first time in their lives, is extraordinary.