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WEALTH MANAGEMENT – INVESTMENT UPDATE JULY 2020

 

Wow what a first half of 2020 it has been

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Pinnacle Road – Investment Market Update 

 

 

 

Dear Pinnacle Road Wealth Clients and Partners,

 

Wow what a first half of 2020 it has been!!

 

A world health crisis, a world economic crisis, unprecedented government and central bank stimulus to keep economies alive, a massive plunge in world share markets followed by a quarterly rise that hasn’t been seen in 20+ years, supermarkets shelves emptied by the hoarders, some companies (think tourism and hospitality) going bust, some companies (think technology and online shopping) going boom, record unemployment, working from home and the list goes on.  At the time of writing, around the world there have been around 14.3m people who have contracted the virus and tragically a little over 600,000 people have died.

 

As we cautiously enter the new financial year and the world shows signs of bracing for a second wave of the virus, it appears the equity market has shrugged off the financial crisis for the time being.

 

Global economies began to come back to life during June with consumers opening their wallets again and overall activity increasing.  The concern remains that this apparent surge in confidence may be the result of the lid coming off pent-up demand and people coming out of isolation rather than a “return to normal”.  What will happen should we return to isolation is of concern.

 

From an economic perspective, it would seem that the unprecedented magnitude of the Australian government’s response to keep our economy afloat has stemmed off a financial crisis to date.  With much of the stimulus set to end in September we remain cautiously optimistic as we head into the third quarter.  Interestingly, many economic forecasters are predicted that the fall off in growth will not be as dramatic as previously thought. 

 

The second quarter of 2020, markets globally and locally closed on their best quarterly gain since the turn of the century.  US markets (S&P 500) fell 33.67% when they hit their low in late March but for the June quarter recovered to finish 5.39% higher for the financial year.  Most other major markets are still not fully recovered from the late March lows, but all saw record growth for the June quarter.  However, with case numbers of Covid-19 also hitting new record numbers the world over, we are hesitant to believe the worst is behind us.  We will be watching closely as companies around the world report their earnings for the June quarter and also on what their outlook statements suggest.

 

The tables below highlights the huge variances in geographical markets, the falls across different markets from February peaks through to the March lows, as well as the recovery through to the end of June.   We have also included some specific stocks so you can see even bigger swings.

 

Exchange

%Fall from 

Peak to trough

%rise 

from trough

%return 

FY20

% return 

CY to 30 June

Australia (ASX 200)

(37.09%)

31.49%

(10.42%)

(11.78%)

US (S&P 500)

(33.67%)

38.57%

5.39%

(4.04%)

Hong Kong (Hang Seng)

(25.33%)

12.59%

(14.42%)

(13.35%)

Japan (Nikkei)

(31.12%)

34.65%

4.76%

(5.78%)

China (Shanghai)

(14.62%)

10.49%

(0.19%)

(2.15%)

England (FTSE)

(34.93%)

23.55%

(16.91%)

(18.20%)

 

Stocks

%Fall From  

Peak to trough

%rise

from trough

%return 

FY20

 % return 

CY to 30 June

BHP (mining)

(29.83%)

32.52%

(12.97%)

(7.97%)

Afterpay (buy now, pay later)

(77.33%)

585.28%

143.28%

108.30%

Webjet (travel)

(72.19%)

21.61%

(66.38%)

(64.88%)

Newcrest Mining (Gold)

(19.71%)

38.72%

(1.31%)

4.23%

Ansell (protective gear)

(32.63%)

71.26%

36.69%

26.42%

Shopify (online shopping)

(29.91%)

152.86%

216.24%

138.74%

Zoom (video conference)

51.54%

58.90%

185.55%

272.63%

Netflix

(6.67%)

26.31%

23.88%

40.63%

 

The reality is that there are still many unknown risks in the market at the moment, which cause me to be cautious when investing in the short term.  However, as we have previously said, as long term investors we need to stay focused on investing in quality companies, managed by quality leaders, who have strong market positions and sound balance sheets.  We need to diversify our portfolios across all the major asset classes and use our asset allocation benchmarks as a guide to buying and selling in the long term.

 

The economy will recover from this, it may take time but it will.  Global share markets have always eclipsed their previous highs, but again it is a question of how long will it take.

 

Please also click up the top to access our June newsletter which provides further details about the economy, how the share market has been performing and other key things to help you navigate through these uncertain times.

 

As always, please feel free to call me if you have any questions or concerns about your portfolio or personal financial situation.  We are here to help and support you through this time.

 

Stay well!

Mark Rice 

Director – Wealth Management 

M: 0435 618 232 E: Mark@pinnacleroad.com.au

 

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