Market update – what’s the market doing mid-Covid-19?
For six months, Covid-19 has been responsible for widespread disruption in global economies. While there have been positive signs in the share market, there is still no clear positive upward trend. As an investor, you should ensure that you take a long-term view and talk to your Britannia Financial Adviser before making any decisions regarding your retirement investment.
The Covid-19 pandemic triggered a worldwide share-market crash, including in New Zealand. The rapid spread of the disease, from China’s Hubei province across the globe, has caused unprecedented disruption.
January 2020 provided investors with a month of positive returns. But in late February, the financial impacts of Covid-19 began to be factored in and massive volatility ensued in the share markets. The extraordinary disruption to economies and society at large, as well as its effect on share markets, has been substantial. Supply chains have been disrupted, lockdowns imposed, and business activity is restricted, putting a squeeze on companies’ turnover and profits and damaging consumer confidence.
The March 2020 quarter had awful results for most investors. Over this period, most countries around the world entered lockdowns of varying severity. New Zealand closed its borders and entered a prolonged lockdown in an attempt to eliminate the Covid-19 virus. It appears this was successful, but other countries are still experiencing significant levels of virus-related fatalities, and this will continue to impact the New Zealand economy.
We have been told to remain hopeful. There are positive signs before us. During April, through May and into June, prices of the schemes’ investments continued to rally. As the wider economic impact of Covid-19, and especially its impact on the share market, remains unclear, we cannot know if this rally will continue, pause, or reverse. The cash portion of your retirement investments had the strongest performance over the March quarter. This illustrates the benefit of a diversified investment strategy, as diversification reduces exposure to the volatile share asset class.
On 13 May 2020, New Zealand moved to Alert Level 2, allowing more businesses to restart, and people’s lives to return closer to normality. Both major political parties are focused on ensuring that recovery and jobs are a priority.
What does the future hold?
For this quarter, cash was the strongest asset class. But that may not be the case in the next quarter. In the long term, a diversified investment strategy is often the surest way to grow the value of your portfolio.
Given what has transpired over the last couple of months, it’s plain to see that New Zealand, and the rest of the world, will experience hard economic times. The Government has implemented a $50B Covid-19 Rescue Package in the Budget, but it is also forecasting massively increased debt. This pattern will be repeated in countries around the world. Those debts will have to be repaid in time, but a recovery is expected. The IMF predicts the global economy will contract by 3% in 2020, but will grow by 5.8% in 20211, assuming the pandemic is contained over time.
It is unclear if the markets will continue to recover in the short term, or if there will be more stumbles along the way. There is a good chance of ongoing volatility as we hear mixed reports, especially when it comes to cures and vaccines. Where possible, investors need to look to the long-term and not make any rash decisions, but rather remain invested.
Focus on your long-term goals
Saving for your retirement requires dedicated investment. While it can be distressing to see your investment portfolio deteriorate due to ongoing volatility in the share markets, we encourage you to take a long-term view.
Your financial adviser is your guide at these times
It is really important that you keep in touch with your Britannia Financial Adviser during times like these. There is no single piece of investment advice that will work for all investors. Everyone has specific circumstances which need to be factored in, so make sure to talk to us before you make any decisions regarding your retirement investment.
Where to go for more information
We encourage you to read our article, ‘What should I do with my retirement investments during the Covid-19 pandemic’ as we have provided answers to some of the common questions investors have asked us during the Lockdown. Although we are currently transitioning to our economy re-opening, many other countries remain in turmoil. As a result, these questions are still relevant as we navigate our new ‘normal’.
At the end of May we also hosted a webinar to further address these questions and talk more specifically about the impact of the pandemic on your retirement aspirations. The webinar was hosted by one of our advisers and directors Alun Rees-Williams and our CEO Gavin Dixon. It’s an informative conversation and we recommend that you take the time to watch it – click here to view.
If you would like more information, don’t hesitate to contact your Britannia Financial Adviser, or email us at email@example.com – we’d love to hear from you.
1 World Economic Outlook, April 2020: The Great Lockdown, International Monetary Fund.
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