The COVID-19 crisis that Australia and the rest of the world is coming to grips with has caused immense concern for many of us. We’ve collated a snapshot of the impacts to the investment market as it is currently.
While we understand that you are probably receiving many emails and updates in relation to the ever changing situation, we also believe it is important for you to hear our thoughts on the impact on share markets, the economy and your financial planning strategies.
We will be contacting you again in the next few days, to provide a summary of the proposed measures that have been announced by the federal government over recent weeks.
As always, please feel free to contact us if you have any concerns. We are here to provide the support and advice you need to ensure we get through these uncertain times together.
We wish you and your loved ones continuing good health in the coming months.
Markets in turmoil
Equity markets have been hit by two big shocks in short order: Covid-19 and Oil price collapse.
Either of these would have been bad enough, but together they have triggered one of the fastest equity market corrections in history – volatility in equity, bond and currency markets has been extraordinary.
Investors have downgraded global growth and interest rate expectations and rushed to exit risk assets (Australian and international shares and property).
Along the way they have encountered liquidity constraints that have forced the selling of other more liquid assets for funding including gold and non-USD currencies.
This has raised the spectre of the GFC, but liquidity conditions are still much better than in the GFC and central banks are on the front foot in supplying liquidity.
When will the market turmoil end?
Markets will need to see a credible shift in the balance between three data flows/timelines:
The spread of the virus outside China, especially in the US
The deterioration in the economic data that is coming very soon
The amount of fiscal stimulus governments are going to provide in coming weeks
At the moment the markets judge the bad news in the first two and is outweighing the good news in the third
When that sentiment shifts from a net negative to a net positive, risk assets will start to rally hard
We think there is much bigger fiscal stimulus to come but sentiment will struggle for a while longer
Stick with your long-term investment strategy – be disciplined.
Continue to invest super contributions into your long-term investment strategy – you will benefit on the other side of this.
Diversification reaps rewards in volatile equity markets.
We have employed quality investment managers in your respective portfolios, they are working very hard to minimise the impact of this crisis on portfolios.
Share markets tend to overreact to these events initially, maintaining your investment strategy will ensure you are there for any rapid recovery. History tells us that a large part of any recovery can occur in a very short period of time, often days. If you are not already in the market you may miss out.
We are receiving daily updates from investment managers, our Licensee Madison and our investment research providers. We will keep you up to date with any changes in our views or investment strategies.
Norman Sinclair – MastFP, DipFP, AFP ASIC No. 249943.
Stephen Vigh – CFP, B Bus (Acc & Man), Dip FP ASIC No. 239508
Sef Pandzo – BComm (FinPlan) ASIC No. 278807 Kyle Medson – Certified Financial Planner ASIC No. 328912
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