An Update on Financial Markets

Over the past few days, there have been many reports of the COVID-19 situation improving in Australia. Our geographic isolation seems to be proving a strong advantage in a time when other nations are straining under the weight of this crisis.

It is fascinating how quickly the messaging reported in the media turns from dire to relaxed and positive. Though, the majority of content remains an inconsistent swirl of opinion rather than facts.

In financial markets, we have seen a strong improvement in asset prices over the past three weeks. Certainly, share markets have had a stellar run, bouncing off one of the fastest declines on record.  That has led to stories about the shortest bear market in history, that we are now back in a bull market, and when is the ‘right time to get back in’.

The psychology of this is of particular importance. Through early March, we observed the significant concern about what was unfolding and where it was leading.  A few short weeks later, many are feeling they have missed an opportunity.

At this time, lead indicators are that the world will experience a protracted economic downturn, the likes of which we have not seen in a very long time.  As has been the case many times in the past, the strong rebound in share markets may well be short-lived.  Although this is very crystal-ball gazing, we think the lows of a few weeks ago will be retested.  We therefore encourage everyone to be prepared mentally for more share market negativity, business closures and job losses around the world, not to mention the human impact of this virus.

We continue to have every confidence in what we are seeing in financial markets. We have written some weeks back and it remains true today, that markets are working efficiently in that all available information is being incorporated into asset prices very quickly.  Additionally, with so much uncertainty about which businesses will survive or fail through this time, our approach to diversification is a wonderful risk mitigant. This applies both to share market linked investments and fixed interest investments.

If you have concerns, please do make contact. We always hope that every one of our clients feels valued and we are working hard to ensure this is the case through this extraordinary time.