We offer a concise perspective on the current financial environment along with its impact on our clients’ investments.
During this period of uncertainty, our weekly 'the week that was' snap-shots are designed to offer a concise perspective on the current financial environment along with its impact on our clients’ investments.
Welcome to our first snap shot below.
The week that was: 30 March, 2020
A moving feast:
Recent weeks have seen significant market volatility, which remains heightened with wild swings in investor sentiment and as the stark economic reality of a world entering a universal lock down is translated into investment return expectations.
Last week we saw extraordinary Federal and State government responses to reduce the spread of the virus. The consequential disruption to business will inevitably hamper profitability across corporate Australia. We have also seen unprecedented numbers of Australians lining up at Centrelink echoing the welfare lines seen in the 1929 Great Depression.
When in doubt:
The open-ended nature of COVID-19 containment measures has created immense uncertainty. The inability to define the outcomes and the impact of the virus has generated significant fear.
Black swan events followed by lower returns are always a risk and highly unpredictable. While a virus vaccine will eventually solve the health concerns, the financial markets and the economy will likely take longer to recover.
A long-term view:
At U Ethical, we remain cautious in the face of uncertainty. In times such as these, we find forecasting extremely difficult, as key variables and assumptions are shifting constantly. Our portfolios entered the COVID-19 period defensively positioned and have been performing well relative to respective benchmarks. That said, we have not been spared absolute declines in portfolio values given the magnitude of market falls.
We’d like to leave you with a quote from the American investment bank Ritholtz Wealth Management LLC―
“Stocks generally go up over time. Why? Because stocks are not just numbers on a screen, they represent something very real. Stocks are fractional shares of ownership in a business. Businesses are the lifeblood of the economy, and the economy is an irrepressible engine of progress.
“This country has seen it all: war and peace, inflation and deflation, natural disasters, and financial crises, just to name a few. The chart below shows the growth of real GDP over time. It is a testament to human’s ability to strive for and create a better tomorrow. Very few people have gotten rich by betting against progress.”