Markets have been profoundly unsettled in the early part of the year with a humanitarian tragedy unfolding in the Ukraine, inflation rates around the world hitting levels not seen for decades and Central Banks preparing to finally lift their emergency interest rate settings. As if the Omicron wave of the pandemic was not enough...
Another solid quarter for growth assets even with some weakness in markets towards the end of the quarter. The recovery from the lows of March 2020 have been so strong that over two years – even including the March 2020 downturn – returns from growth assets have been well above average. We have seen much more than just a recovery...
Many investors fear the impact of a return to interest rates of 5%, 6% or even 7%pa that were considered normal just a few years ago. They worry about the impact on share and property markets, they worry about locking in fixed rate term deposits and annuities and missing out on the big rate rises to come. Others are worried about their ability to service borrowings if interest rates move sharply higher. Yes, interest rates will not be this low for ever, but any rate rises are likely to be modest and temporary. As for 7% cash rates, we are unlikely to see them again for decades. Read here to read out views on why this is the case.
At the end of June 2021 we saw another strong quarter for equities and property securities. Since that time New South Wales has declared a national emergency and other states are in various stages of lockdown. We may continue to see further volatility in the market reinforcing the importance of staying diversified and taking a long term view to investing. We thought it timely to share our view on current market returns and the long-term outlook.
From a Self Managed Superannuation Fund (SMSF) perspective, there were some welcome surprises for SMSF trustees, which we have outlined in more detail attached. Also included are the Budget Taxation changes which may impact eligible business owners.
There has been commentary in the media recently about whether the markets may be overheating. As the recovery unfolds, some investors may be worried about the formation of a bubble.
Watch this presentation from Tim Farrelly, a member of Private Capital Advisers Investment Committee on his views in relation to this critical investment issue.
All years are amazing in their own way but 2020 was dramatically different. A global pandemic, the steepest recession we have seen for almost 100 years, the first recession in Australia since 1990, rapidly rising unemployment, deserted cities… who would have thought?
And yet, despite all the ups and downs, markets haven’t been too bad. Australian equities have returned 3.5% since the beginning of the year, US equities 9.4% and listed property -2.5%. If we had been asleep all year, we may have been tempted to think it had been uneventful.
Of course, it was not in the least. Have a read here for the lessons to learn - or relearn - as a result.
Over the past quarter we have seen generally positive market movements amidst a generally deteriorating economic environment. While on the face of it this seems odd, it is not really that unusual and is largely a continuation of the adjustment to the market’s over-reaction in March. As can be seen in the table below, Australian equities and listed property are still lower than their levels of a year ago despite the post-March recoveries...
There has been some commentary in the media as of late as to how more people are reviewing their wills thanks to COVID-19 and related changes in property and share values. Having an up to date estate plan is essential if you want a say in how your wealth is eventually distributed. Read here in more detail as to why having a newer estate plan gives you the confidence your estate plan will deliver the results you want.
A large part of the downturns in February and March have been recovered as calm has returned to the markets. Nonetheless, we believe that it is too early to say that the market impacts of the pandemic are behind us.
There are still a huge number of uncertainties. We don’t know if the Victorian outbreak is about to be brought under control. We don’t know if the other states will be able to avoid secondary flare ups and shut-downs.
At the start of last week I wrote,
“The market correction at the end of February has taken us back into Fair Value and Cheap territory for most asset classes. This is a time to be fully invested - even though it may feel uncomfortable. This is what long-term investing is all about.”
What an understatement. Today that statement is even more true. This is a time to be buying not selling.