Investment Update – June 2020
A Wild Ride to Say the Least
Those familiar winter activities like heading to the pub for a drink with friends or watching a game of footy are a welcome sight with COVID-19 restrictions starting to ease.
We’ve been ‘through the wringer’, and a lot of Australians are yearning to get back into a routine.
Australia has made good progress stopping the threat of COVID-19. Consideration is now firmly focussed on re-opening the economy.
The health risks are easing, but the economic risks are rising. It is a case of finding some balance.
The worst-case scenario for the public and share markets did not eventuate though. And the Government now has more options to provide stimulus if it needs to. A small $60 billion ‘accounting error’ regarding JobKeeper cost estimates makes this possible.
For the local share market, the ASX 200 peaked at 7,139 on February 21. The vicious sell-off post the spread of COVID-19 across international borders was a frightening sight for many hard-working Australians.
We eventually bottomed out at 4,546 on March 23, making it a 36% drop from top to bottom. Late March was not the time to panic though, despite the rapid decline.
It was the time to keep a cool head as we’ve seen many times before with short-term market volatility.
The market has now steadied and looks headed for 6,000 points—a much more digestible drop of 16% from peak to trough with more good news on the way as the economy kicks back into gear.
In the U.S., the market continues to track well ahead of the Australian market. The S&P 500 index is almost back to it its pre-Corona high of 3,373. A huge sell-off overnight on June 12 has the index trading back at 3,000.
The index bottomed on March 23 after sliding 34% from its record high on early coronavirus concerns.
Since reaching that trough though, the S&P 500 has rallied on unprecedented aid from the Federal Reserve, optimism for s swift rebound, and better than expected economic data.
Energy firms posted some of the most significant leaps ahead of ‘stay-at-home’ plays like Amazon. After the price of oil plunged, widespread production cuts and recovering demand renewed hope for the struggling economy.
The S&P 500’s year-to-date gains lasted only a few days during the second week of June. U.S. stocks nosedived on Thursday, June 11 as rising concerns over corona cases across the nation and a cautious tone from the Federal Reserve revived investor fears.
The index is still sitting on a massive gain from corona-induced lows in late March though.
We can’t stress how important it is to have exposure to the international share markets. The Aussie market accounts for only a small percentage of global indices, so it’s essential to have exposure to rising markets offshore.
Without adequate exposure to companies in North America & Europe then Australian investors can be left wanting when it comes to a global recovery.
If you’re closing in on retirement and would like some clarification on your current financial situation, then please don’t hesitate to give us a call on 1300 242 700 or head to our website at www.muirfieldfs.com.au.