We hope that you are keeping well and that as restrictions relax you remain safe and healthy.
The troubling scenes from the US, the virus possibly out of control in some parts of the world – Brazil, Russia, India (despite strict lockdowns) – lead us to value our position in Australia and to reflect that the “Lucky Country” only keeps lucky with hard work and a strong sense of community.
As for the markets, the share and bond markets, it is impossible to time them. Our investment philosophy is to choose an investment approach, where the expected maximum fall can be accepted, without wanting to sell out at a low point.
If investments need to be sold, this is always better when the asset price is at a high point. Buying investments is better when prices are down – the investments are then “on sale”. This is a safer way to build or maintain wealth.
For people holding extra cash and wanting to move it into growth assets, it’s a challenging time. We’d ideally like a large correction giving asset prices that are significantly lower. Where we believe that the market is being too optimistic and over-priced, it is better to be patient – which can be hard. A compromise can be to move gradually into the market – “dollar cost average’ is a term for buying a set amount each month for a few months, no matter what the market does.
In sampling investment analysts’ opinions at the moment, the majority believe that the economic damage from the Corona Virus is going to be worse than it has been so far – and that he markets will then fall again:
Jay Sivapalan, Janus Henderson writes: “We see this crisis as an economic ‘stop’ and expect a very deep, very sharp depression-like recession, though one that is finite, likely to last months rather than years”… and there is the risk of “further escalation in tensions between the US and China … and between Australia and China”.
Adam Bowe of Pimco writes: “If new virus cases are … contained, allowing businesses to reopen more rapidly, growth may rebound more sharply … (otherwise there could be) … widespread business failures and an extended period of (high) levels of unemployment”.
However, no matter what the markets do now, in a few years the current uncertainty will be history and good businesses will have survived and prospered.
Wishing you health and happiness.
Tom, Maria and Kerrie
at Financial Springs