The Coronavirus pandemic and the economy - a Q&A from an investment perspective

Along with the horrible human consequences, the coronavirus pandemic is having a huge impact on the way we live, and as a result, investment markets. This note provides a simple Q&A for most of the main issues from an economic & investment perspective.

  • Significant government support is essential to enable parts of the economy to successfully hibernate;

  • This will be financed by borrowing and is affordable, given Australia’s relatively low public debt and low borrowing rates;

  • Central bank support to keep financial markets functioning properly is also essential and quantitative easing is part of this; and

  • We are more likely to see a U-shaped recovery than a V or L.

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The second $66.1bn government stimulus package

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Released on 22nd March 2020, the second round of government stimulus package includes:

  • early release of superannuation - individuals in financial distress may be able to access up to $10,000 of their superannuation in this financial year, and the next ;

  • temporary reduction of pension draw down rates for this financial year, and the next;

  • deeming rates have been reduced;

  • supplements increased, access extended and eased; and

  • bankruptcy safety net

Click to read more about what the stimulus package includes for individuals and businesses.

Widespread reports of COVID-19 malicious scams being sent to Australians

There has been a significant increase in Australians being targeted with COVID-19 related scams and fishing emails. These phishing emails are often sophisticated, preying on people’s desire for information and imitating trusted and well-known organisations or government agencies.

Click here to read more about these scams, and how to avoid them

Investing basics: 5 Steps women can take to improve their retirement readiness

Women’s superannuation is not so super. At retirement, Australian women on average have $157,050 whereas men have $27,0710 - a gap of $113,660, according to data released by the Association of Superannuation Funds of Australian in 2018.

There’s no easy fix for the problem, but women should consider the following steps - Read more

The plunge in shares – seven things investors need to keep in mind

Shane Oliver, Head of Investment Strategy and Chief Economist.

The attached note looks at the plunge in share markets over the last week. The key points are as follows:

  • Share markets have fallen sharply on the back of coronavirus concerns.

  • Shares may still have more downside and the uncertainty around the coronavirus crisis is very high, but we are of the view that it’s just another correction.

  • Key things for investors to bear in mind are that: corrections are normal; in the absence of recession, a deep bear market is unlikely; selling shares after a fall locks in a loss; share pullbacks provide opportunities for investors to buy them more cheaply; while shares may have fallen, dividends are smoother; and finally, to avoid getting thrown off a long-term investment strategy it’s best to turn down the noise during times like this.

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Key financial advice for 2020

At the 2019 FPA Congress, Money & Life Team asked financial planners what their key financial advice is for Australians in 2020. The most common answer? Ask more questions! Whether it’s something you don’t understand or something that sounds too good to be true, planners say the best thing you can do for yourself and your finances is ask. Watch the video for more advice on how you can best handle your finances.

Watch the video

From bushfires to Coronavirus - five ways to turn down the noise around investing

Shane Oliver, Head of Investment Strategy and Chief Economist

The attached note takes a look at the worry list for investors, which is currently focussed on coronavirus, and how to turn down the noise around investing. The key points are as follows:

  • The coronavirus outbreak, while horrible from a human perspective, is just another of a long list of worries for investors.

  • Our natural inclination to zoom in on negative news combined with a massive ramp up in the availability of information is arguably making us worse investors: more fearful, more jittery, more short-term.

Five ways to help manage the noise and turn down the worry list are: put the latest worry in context; recognise that shares return more than cash in the long-term because they can lose money in the short-term; find a process to help filter noise; make a conscious effort not to check your investments so much; look for opportunities that investor worries throw up.

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How to get out of debt

Many of us have debts and bills to manage, but what happens when you’re really struggling to pay? Find out what to do when you fall behind with bill or loan payments and what to expect if you don’t.

The key points are as follow :

  • What to do if you can’t pay

  • Accessing super to pay debts

  • What can happen if you don’t pay

  • What to do about debt recovery

  • How long can debts last?

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Five charts to watch regarding the global economy and markets this year

Shane Oliver, Head of Investment Strategy and Chief Economist.

The attached note looks at five charts worth keeping an eye on regarding the global investment outlook. The key points are as follows:

  • Shares are at risk of a short-term correction or consolidation after a strong run over the last year and with sentiment now very bullish. However, this year should still see good returns for investors as global growth edges up and interest rates remain low.

  • Five key global charts to watch are: global business conditions PMIs; global inflation; the US yield curve; the US dollar; and global trade growth.

  • So far so good, with PMIs improving a bit, inflation remaining low, the yield curve steepening, the $US showing signs of topping and the US/China trade truce auguring well for some pick up in world trade growth.

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The risks with climate change you could be missing

Human and social development is not possible without water – but it’s an often misunderstood part of the climate change debate. With awareness and action, there are ways the investment community can make an impact. 

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Planning for aged care

The decision to enter aged care can be difficult, but a new range of tools and services helps to simplify the process.

  • The best place to start is at the My Aged Care website.

  • The Department of Human Services’ Financial Information Service can also help you to understand the financial aspects of aged care. 

  • If you are thinking of entering an aged care facility or getting help with living at home, the Department of Human Services may be able to help with the costs.

  • The Department of Human Services has made vast improvements to the aged care forms this year. These forms have been significantly trimmed back in size and the front page now makes it clearer who needs to complete them.

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Review of 2019, outlook for 2020 – the beat goes on

Shane Oliver, Head of Investment Strategy and Chief Economist.

The attached note reviews what 2019 meant for investors and takes a look at the outlook for 2020. The key points are as follows:

  • 2019 saw economic and profit growth slow, recession fears increase and the US trade wars ramp up, but solid investment returns as monetary policy eased, bond yields fell and demand for unlisted assets remained strong.

  • 2020 is likely to see global growth pick up with monetary policy remaining easy. Expect the RBA to cut the cash rate to 0.25% and to undertake quantitative easing.

  • Against this backdrop, share markets are likely to see reasonable but more constrained & volatile returns, and bond yields are likely to back up resulting in good but more modest returns from a diversified mix of assets.

The main things to keep an eye on are: the trade wars, the US election, global growth, Chinese growth, and fiscal versus monetary stimulus in Australia.

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