Special Update: Coronavirus and Market Volatility

Special Update: Coronavirus and Market Volatility 1

An update on the Coronavirus (COVID-19) and how it is impacting investment portfolios and superannuation funds Australia wide (and globally).

As the world comes to grips with what is now being referred to as a pandemic, it’s important to keep yourself informed with facts rather than buy into the media hype that is consuming headlines and causing some people to panic and overreact to the situation.

Special Update: Coronavirus and Market Volatility 2

Here is a link to the World Health Organisation (“WHO”) website which contains facts about the Coronavirus.

Governments around the world, including the Australian Government are working towards containing the virus as best they can. Immediate measures have included border control, travel restrictions, travel bans to certain countries, quarantining and self-isolation (for those who have or believe they may have the Coronavirus).

Its measures such as these that are impacting the global economy, in particular China (the second largest economy in the world) which already had its largest manufacturing precincts in lockdown. As China is Australia’s largest trade partner and supplier of manufactured goods, we are now feeling the impact on Imports/Exports, as well as Tourism (which also wasn’t helped by the recent bushfires) and Education (such as Universities that rely on international students).

How has this affected your investment portfolio and/or Superannuation fund?

Share prices have fallen mainly due to speculation and uncertainties surrounding the extent of the impact the coronavirus may have on the global economy and company profits.

Special Update: Coronavirus and Market Volatility 3In a recent briefing to Advisers, Implemented Portfolios Manager, Jon Reilly, stated that while there will be more bad news to come as economic data gets updated to reflect the substantial disruption to economic activity in Q1 2020, the market does look to have over-reacted. He also went on to say that feedback from market participants has indicated that a lot of recent trading activity has been via automated trading programs, and that this has contributed to the enormous daily swings we have seen.

While we do have a serious situation at hand, the RBA has cut interest rates and the Government will soon be releasing its stimulus package as it strives to curb the economic effects of the virus.

My view is that we may continue to see some more short-term pain before the market reaches a bottom, possibly over the next few months. Hopefully by then we will have more of an understanding and containment of the coronavirus, which along with the Government’s stimulus package and interest rate cuts should pave a clearer road to recovery towards the end of the year.

My advice: keep in mind that your portfolios and superannuation funds are a long-term investment, and as such its always best to stay on course and ride out situations like these. As I point out to all my clients, there is no such thing as a straight-line trajectory when it comes to investment returns, and to reasonably expect some volatility and negative returns along the way.

What you can do: Block out the “noise” of mainstream media, keep calm and don’t panic! We have experienced similar conditions in the past where markets have over-reacted and prices have fallen, only to be followed by an upswing and recovery phase (all be it, this could take a little longer given the uncertainty at hand).

If you are still concerned, drop us an email here or call the office and Renee will coordinate a suitable time.

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