16 Apr 2020
We suggested that the market was looking expensive in the last review, but no one had any idea of what was around the corner.
In the past, the global spread of viruses has been contained and they have had minimal economic impact. SARS was the most similar and much more deadly, but everyone showed the symptoms and they were not contagious until just before the symptoms showed. As a result, it was easier to identify and quarantine infected people. The specific feature of this virus being deadly to some, but very mild in many, has made it difficult to contain. This has resulted in previously unimaginable personal restrictions that have brought economies to a halt.
Our economies were not built with an emergency break, so there have been rapid and massive economic policy initiatives to protect and preserve the economy, until we can better deal with the health issues.
Uncertainty has never been so visible (even though it always exists) and markets do not like it. Almost everyone has been financially impacted as businesses have closed their doors and demand has collapsed. Company profits, rental income and employment security has been thrown into disarray.
However, policy makers are working to limit the damage.
While there is no end in sight at this stage, we are pleased that our focus on risk management, quality investments, asset allocation, and diversification have ensured client portfolios have held up better (by a wide margin) than portfolios of similar risk profiles.
The severity of this medical and economic crisis is outside the range that most investors consider, but the reality is that bad things happen and often they are unpredictable, so you always need to consider risk.
They say that you only see who is swimming naked when the tide goes out. Well the tide is as far out as it is ever going to get and what are normally reliable assumptions need to be questioned. There has never been such an all-encompassing economic disruption.
While no one likes losing money as everyone did in the March quarter, we are pleased with how portfolios are going this financial year, in the most difficult environment we have ever seen.
We hope our ongoing communication has been of value to you.
For further information or to discuss how we can help you, please speak to your adviser.