COVID-19 Market Update – May 2020

While Australia has done comparatively well to “flatten the curve” of COVID-19 infections, the impact of the pandemic on the economy and financial markets has been significant.

The federal government has provided a range of support measures to keep businesses afloat and to keep people in jobs while social distancing restrictions remain in place. Efforts to control COVID-19 do appear to be gaining traction. It’s important to understand, however, that the coronavirus threat has not passed nor is it clear when it will pass. This will continue to influence the market in the months ahead.

Without minimising the impact that coronavirus has had on financial markets, the economy and society as a whole; history tells us that these events are temporary, and they do eventually pass.

Similar situations in the past, whether caused by health events (SARS) or financial crisis (GFC), demonstrate that economies and financial markets do eventually recover over time.

 

The road ahead

While we’ve seen a slight stabilisation in the markets since March 2020, they are likely to be bumpy for a while. Since February 2020, financial markets have been focusing on one metric: the rate of increase in infections (and “the curve”). When the curve starts to flatten on a global scale, or ideally, once a vaccine is conceived, the recovery process can truly begin.

No one can predict with certainty what the recovery will look like but the general view at this time is that the process will be accelerated by support from policy makers. Australian policy makers have injected billions of dollars worth of stimulus designed to support the economy through this period. The US Federal Reserve has also announced in April that it was “committed to using our full range of tools to support the economy in this challenging time, we are going to use them forcefully, proactively and aggressively until we are confident that we are solidly on the road to recovery.”

 

Where we stand now

The reality is COVID-19 has not yet been contained, nor is there a viable vaccine. With the uncertainty posed by what is now the worst outbreak in the world, we face an unpredictable landscape when it comes to the economy and financial markets.

For members who have some time before retirement, the general advice is to sit tight and let the market settle and recover with time. As mentioned, economies and financial markets do eventually recover, with significant returns achieved in the years following these crises. For members who are in a position to make additional contributions, the opportunity to participate in a potential market recovery along with the benefits of compound interest may now make a valuable opportunity to add to your retirement savings for the long term.

If you are in a position where you need a more defensive strategy for your super, there may be alternative options for you in which we recommend you seek financial advice. For example, you may consider directing future contributions to cash for a period of time. You may also want to switch a portion of your super balance to cash, rather than switching your entire balance, if you are not currently making contributions.

 

Is your super safe?

Rest assured, we are doing everything we can to continue to steward your super through this season. In the short term, all super funds and investors will be impacted by the market downturn, however, a well-diversified, disciplinary-positioned portfolio such as ours should fare better despite market disruptions.

As a growing super fund, we are supported by strong positive cash inflows and sustainability metrics. Christian Super has historically been more defensively positioned with a focus on capital preservation. As a result, our MySuper option outperformed industry benchmarks during the March 2020 quarter, and financial year to date.

The Investment Team are closely monitoring the landscape and continue to look for good opportunities in this environment.

 

Questions?

Our Member Care Team is here to help you.
Phone: 1300 360 907, 9:00am – 6:00pm (AEDT) Monday to Friday
Email: members@christiansuper.com.au

Disclaimer: The content of this article includes advice that is general in nature and does not consider your personal situation. Christian Super encourages all people considering their options in retirement planning to seek out qualified professionals who can provide specific personal advice.

Photo by Hugo Kruip on Unsplash