October has seen a period of consolidation with investment markets trading within a narrow range. Market valuations haven’t moved significantly for some time, with the likely catalysts for future direction pending the winner of the US Presidential election, between Joe Biden and Donald Trump?
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But even when the result is known, we do not believe any short term investment adjustments will be warranted.
Although the impact of Covid-19 still weighs heavily on domestic and global economies, with containment in Australia (and importantly Victoria) showing rapid signs of improvement, a worrying trend of a second wave infection across the UK and Europe is starting to emerge. One certainty is that until a vaccine can be found, and importantly produced on a global scale, we will continue to become accustomed to face masks, physical distancing, and travel restrictions.
Considering the uncertainty around Covid-19 and the economy, it has clearly been demonstrated that since the first quarter of 2020 there is a growing appetite for investment on the bank of unprecedented Government stimulus. The tradeoff between risk and reward persists and in times of uncertainty a long-term view typically rewards investors.
The October meeting of the RBA signaled a hold on monetary policy with the official cash rate remaining at 0.25%. Commentary around the cash rate would suggest that the likelihood of the next rate move will be down, in an attempt to encourage spending and borrowing, while putting further downward pressure on cash assets, with most depositors now struggling to achieve returns in line with inflation.
Technology stocks, particularly aligned participants in the online retail space, continue to benefit from changing consumption habits during lockdown. We have witnessed the rise of buy now/pay later (BNPL) platforms like Afterpay (APT) who’s share price has improved dramatically (over the last 6 months).
If you’d like to discuss your investment needs further, we encourage you to call our qualified financial planning team on (03) 5224 2700.