Financial Advice in a Changing Market Place
Thursday, December 03, 2020
Financial Advice in 2020 has required a solid yet flexible long-term investment strategy. Responding effectively to a volatile and changing market landscape has been vital as we stepped through the unknown territory of the global pandemic and it’s ever unfolding impacts on business and consumer sentiment.
The second half of 2019 right through to the end of February this year saw the Australian Share Market climb to record highs of 7200 points on the All Ordinaries Index. This was based on the fact that interest rates were at record lows, and shares represented better value and opportunity for returns than Cash.
Worldwide Covid-19 Markets Falls
Market growth all came unstuck of course as the COVID pandemic spread out of China and accelerated beyond anyone’s anticipation impacting the global markets as any crisis does. We saw markets all around the world fall by 35% in a very short time and the world became a very uncertain place. We then experienced an Australian market bounce back beyond 6000 points on the All Ordinaries index.
During the 2008 Global Financial Crisis it took eight years for the Australian Share Market to get back to this level, so in comparison this was a very sharp bounce back. Interest rates plummeted further in order to stimulate the economy, and fell to the historic low of 0.1% which has been kept on hold in the December 2020 decision by the Reserve Bank. Many forecasters are predicting long term low interest rates which will effect consumer demand and investment choices both in property and in the financial markets.
Winners and Losers
The market plateaued for a number of months as borders closed and Governments went on a spending spree in order to support businesses and their employees. The world certainly changed and businesses that could adapt to the new COVID environment were able to remain profitable. We saw this with the likes of Coles and Woolworths and the panic buying that ensued. Wesfarmers who own Bunnings also did extremely well as a result of people being at home and occupying themselves with house renovations.
There are many more examples both in Australia and globally with the best success stories revolving around technology and online purchasing. Most people had not had much to do with Zoom before the lockdown however this has now become a household name. The price of Zoom shares before the crisis were $70-80, and at their peak they were trading at $586/share.
Unfortunately there were some losers throughout this time with the biggest name in Australia being Virgin. As people became comfortable with work from home arrangements, casual clothing made a huge boom, while the likes of Hugo Boss took a tumble in sales with suits and business clothing taking a back seat.
China increased demand for Australian iron ore for their steel production in order to stimulate building projects and recovery in their own economy. As a result the price was driven up from a budget prediction of $55/tonne to over $100/tonne thereby increasing corporate tax revenue to the Australian Government and reducing public debt projections. At current prices, it's looking a lot like Australia's budget deficit would be less than forecast. Of course this is tentative with the current Australian-Chinese trade tensions.
Ensure your Financial Strategies Take into Account the Changing Business Landscape
All this changing business landscape affects investment strategies as Fund Managers position monies in businesses that are thought to maximise returns.
It is extremely wise in the current economy to consult with your financial adviser regarding your investment strategy as we navigate the new world of business and investment. If you do not have a financial planner on retainer we welcome you to contact our Maher Digby financial planning Nambour team for the the most comprehensive, best financial planning across Sunshine Coast and the Wide Bay area.
For more Information contact Mark Digby at Maher Digby Securities Pty Ltd - Financial Advisers – AFSL No. 230559 – Ph: 075441 1266. This document was prepared without taking into account any person’s particular objectives, financial situation or needs. It is not guaranteed as accurate or complete and should not be relied upon as such. Maher Digby Securities does not accept any responsibility for the opinions, comments, forward looking statements, and analysis contained in this document, all of which are intended to be of a general nature. Investors should, before acting on this information, consider the appropriateness of this information having regard to their personal objectives, financial situation or needs. We recommend consulting a financial advisor