You will have seen that markets continue to fluctuate with the impact of global events stemming from the Coronavirus.
Our Research Team has prepared a note to explain what is currently happening and how the Reserve Bank of Australia and the Government are responding to support businesses and individuals alike. The Research team are carefully analysing these developments and will support me, your Financial Adviser, with updates.
We hope the following update provides some useful information. Please reach out to me if you would like more information or have any questions about your situation.
Coronavirus cases continue to grow around the world. Italy (69,176 cases) and New York City (over 15,800 cases) are amongst the worst-affected areas. Australian cases have also risen to 2,044 driven by Australians returning from overseas travel. This has seen governments react with major lockdowns on state borders and the inevitable shutdown of many businesses. Governments and central banks, such as the Reserve Bank, are acting to stimulate the economy and help people who have lost their jobs.
These moves have negative implications for the economy and mixed ones for your investments.
Government efforts to reduce virus cases include:
Our health response appears to be doing reasonably well with 8 reported deaths in Australia. For context other countries with similar numbers of infected cases had substantially more deaths and intensive care cases.
Some of these measures cause substantial economic damage with people in the hospitality sector amongst the hardest hit. Given pubs and restaurants for example have been forced to close for the foreseeable future, these employers have had little choice but to let staff go. This has seen a surge in Centrelink applications this week as reported in the media.
The government has been trying to help by announcing:
Will the stimulus work?
The government measures will help support people that lost their jobs because of the impact of this outbreak.
However, there is also a higher chance of an Australian recession for the first time since the early 1990s because of the job losses and business shutdowns that are happening.
In addition, there are flaws in the current stimulus that means recovering could take longer for our economy. We may see higher unemployment rates and increased Centrelink reliance for some time.
What is being done elsewhere?
This will help the global economy eventually recover from the actions taken to stop the spread of the virus.
What does this mean for your investments?
The Government stimulus and RBA policies will help stabilise the economy in the medium term.
Be prepared for:
Good news stories:
One of the best times to stay invested was at the end of the GFC in February 2009. Equity markets had fallen a lot and investors gained from holding and reinvesting those dividends back into their portfolios (to buy more shares).
If you invested $1 in May 1992, that has grown to $8.42 as of 24 March this year with 68% of this coming from holding and reinvesting your dividends.
This is an example of how staying invested for the longer-term makes a difference and the gains that you can make by holding the course.
*Authorised Representative of Millennium 3 Financial Services Pty Ltd
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