Coronavirus: Market Update 12 March 2020

Market update (12 March 2020)

What is happening to investment markets?

Market volatility is constant, and the way in which markets fluctuate can be the result of a vast number of variables. In times of uncertainty and instability, many investors pull money out of share markets reducing demand and driving prices down.

The key issue markets are facing at the moment is the outbreak of the Coronavirus.

Global share markets and the media reacted to the Coronavirus (COVID-19) outbreak well before the World Health Organisation (WHO) today characterised it as a pandemic. Headlines about the outbreak have now dominated media cycles for weeks highlighting the uncertainty around how widely the virus will spread and the impact it may have on economies around the world. This uncertainty has resulted in a significant downturn in most if not all share markets.

Recent panic buying of groceries and a reluctance from people to visit restaurants or travel are signs of the real impact the Coronavirus is having on economies. One of the key concerns of investors is that although the primary impacts of the virus may be containable, flow-on impacts (such as cancellation of travel plans for example) will exacerbate the problem and cause further economic damage. In Australia, this has occurred off the back of an already horrendous summer for the tourism industry who are still struggling to recover from the bushfire crisis that gripped much of the nation earlier this year. 

What happens next?

Without dismissing the significance of the Coronavirus and the concerns of investors, it is important to note that for most, superannuation is a long term investment so their savings will have time to ride out this downturn in the market. The situation continues to evolve by the minute but some things to be aware of now are:  

  • The Reserve Bank of Australia recently reduced the official interest rate to 0.5% – the lowest it has ever been – to help stimulate spending and support the economy.
  • The Federal Government has today announced a $17.6 billion stimulus package to offer an immediate boost to the Australian economy with $11 billion of it to be spent by 30 June this year.
  • At the end of February 2020, the Australian share market was up 19.6% since the start of 2019.
  • EISS Super returns remain positive over the 12 months to 29 February across all portfolios.
  • Inevitably, stability and confidence eventually return to normal along with investor behaviour and market performance.
Should I make changes to how my super is invested?

When considering current and future market volatility, it’s important to remember that how you invest your super should be a long term strategy. But for those who are concerned, here are some general tips.

  • Continue to monitor your super – remember share markets will take time to correct.
  • Remember, if you are contributing to your super (or your employer is contributing on your behalf) it is likely that every dollar you put in is currently buying you more investment units than it did a month ago.
  • Check how your super is invested. EISS Super’s investment options are diversified and none invest 100% of your money in shares, so when you hear that the share market is down by a certain percentage that does not mean your super is down by that percentage.
  • Think about the level of risk you’re comfortable with.
  • If you have a Financial Planner, continue to work with them. And if you don’t and you want personal advice about how to invest your super, please call us to make an appointment.
We’re here to help.

During challenging times, where market volatility is high it is understandable that members are concerned about their super. If you have any questions or for more information, please call us on 1300 369 901, Monday to Friday from 8am to 8pm (AEST).