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With the sharemarket stabilising since hitting its low point in late March, investors are feeling a little better about the state of their portfolios. However, there is still a lot of uncertainty with regards to the impact of Covid-19 on the economy.
Restrictions are being eased and the curve is flattening but we are still hearing about new cases and deaths. There have been recent positive reports of anti-viral drugs and many are hopeful of a vaccine. However, at the same time, there are many fears of a second wave of the virus as we near closer to winter.
With all this uncertainty, it is hard not to ponder what could be in store for the rest of the year. Of course, I would love to have a crystal ball and know what is going to happen, instead let’s look at a couple of the key questions on many people’s minds.
After around a 35% plunge, the Australian share market has already increased by around 23% from its low point on 23rd March. My gut is telling me that we have already seen the bottom of the share market, but ultimately the jury is still out. If we do not see a dramatic increase (second wave) of new Covid-19 cases, then chances are good that we have seen the bottom.
The government has committed billions of dollars to stimulus packages to do its best to keep the economy running, or at least hibernating. Without this stimulus, the economic situation would be a lot more dire. The federal governments JobKeeper and JobSeeker programs are set to expire in September, the same time the banks are set to lift their loan deferrals. This will be a real test for the economy as many Australians will lose their stimulus payments and may not be able to find employment.
The Australian property market had a positive end to 2019, buoyed by a Coalition election victory with policies supportive for the property market.
It is hard to see there not being an impact on house prices because of Covid-19. With Australia likely to enter a recession with two negative quarters in March and June, and unemployment on the increase, this is all but certain to flow through to the property market.
When the stimulus measures end, if unemployment spikes and people cannot meet their loan repayments, we could see a flood of property supply on the market due to forced sellers.
The consensus is that we could see a 5% to 10% decline in the property market, however, there are some more extreme views that the falls could be as high as 30% in some parts of the market. The severity really depends on how quickly the economy can get back up and running with people returning to, and securing work.
In short yes. Now is always a good time to invest with the right strategy. Timing the market is fraught with danger. Returns from cash and term deposits are at record lows and do not look to be increasing anytime soon. For those investing now, their entry point is some 20% lower than if they had of invested late last year or earlier this year. While there are no guarantees we will not see a lower market in the short term, we subscribe to a long-term investment approach at Hewison Private Wealth.
While the economy may be in for some pain, the sharemarket and the economy do not always move in perfect synchronisation. Sharemarkets are forward-looking and can bounce quickly, as we have seen since the bottom on 23rd March.
As we currently stand, there is light at the end of the tunnel for Australia. Provided Covid-19 can be contained with minimal damage to the economy, we might have a more positive end to 2020 than appeared to be the case a couple of months ago.
Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email email@example.com or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.