2019-20 saw poor returns – but it could have been much worse

July 9th 2020

poor returns main

Key points

  • 2019-20 saw a rough ride for investors as coronavirus hit resulting in small losses for well-diversified investors.
  • Key lessons for investors from the last financial year were to: maintain a well-diversified portfolio; timing market moves is hard; beware the crowd; turn down the noise, and don’t fight the Fed.
  • With coronavirus risks still high, investment markets may see more short-term volatility. But over the next 12 months returns from a well-diversified portfolio are likely to be constrained, but okay.



The past financial year was poor for investors as coronavirus knocked economies into what is likely to be their biggest hit since the 1930s. Shares were hit hard, but the blow was softened by a strong rebound in the June quarter. This note reviews the last financial year and takes a look at the outlook.


Pre and post covid

The past financial year can effectively be divided into two halves. The period from July last year into early this year saw generally strong returns from shares and growth assets, as fear of recession faded helped by central bank easing and a truce in the US/China trade war and gave way to expectations of some improvement in global economic growth. Despite devastating bushfires and a subdued growth outlook, even the Australian share market made it to a record high in February. Against this backdrop, returns from government bonds were subdued.

This now seems like it was a different world as it all started to fade and ultimately reverse as the coronavirus epidemic started to become a problem in China in January. Initially, it was hoped it would be contained to China (which successfully controlled it allowing reopening of its economy from March) but from late February the number of cases escalated in Europe, then the US, Australia and ultimately emerging countries, resulting in severe lockdowns driving sharp economic contractions in economic activity. So, between 20th February and 23rd March share markets collapsed by around 35% dragging down commodity prices. This also saw the $US surge and the Australian dollar plunged to around $US0.55.

However, from late March shares staged a rebound driven by policy stimulus, a decline in new covid cases, economic reopening and a rebound in economic data. From their March lows to June highs global shares rose 40% & Australian shares rose 35% and commodity prices and the $A also rebounded.

So, despite this wild ride, for the financial year as whole global shares returned 5.2% in Australian dollar terms. This was led by the US share market which outperformed due to a heavy tech and health care exposure, relatively low exposure to cyclical shares and massive Fed quantitative easing. Australian shares didn’t fare so well & still lost 7.7% for the financial year.

Cash and bank deposits had very low returns as the RBA cut the cash rate to 0.25% in March. But bonds had reasonable returns as plunging yields provided capital growth for investors. Despite the plunge in interest rates and bond yields, the listed property saw double-digit losses as the coronavirus has driven slump in economic activity pushed up vacancies and depressed rents in retail and office properties. Returns on airports were similarly depressed weighing on direct infrastructure returns.

This all saw small negative returns for balanced growth superannuation funds of around -1.5% after fees and taxes. Of course, it would have been much worse, were it not for the June quarter rebound in shares. The hit to super returns also followed several years of strong returns and the five-year average is just over 5% which is not so bad given (pre-tax) bank deposit rates averaged around 2% and inflation averaged 1.5%.


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Source: Thomson Reuters, AMP Capital


Like shares, Australian residential property had a roller coaster ride – first rising 10% on rate cuts and the Federal election before starting to slow as coronavirus hit.


Key lessons for investors from the last financial year

These include:


The negatives

There are a bunch of threats which are likely to lead to a further correction in shares in the short term, ongoing bouts of volatility and constrained returns. Here are the big ones.


The positives

However, there are a bunch of positives providing an offset.


Source: Bloomberg, AMP Capital



Source: RBA; AMP Capital


What about the return outlook?

With coronavirus risks still high, investment markets may see more volatility. But over the next 12 months, returns from a well-diversified portfolio are likely to be constrained but okay.


Things to keep an eye on

The key things to keep an eye on are: coronavirus hospitalisations and deaths, as a guide to the degree of isolation; global business conditions PMIs and unemployment; US election prospects; and Australian house prices.

If you have any questions about this please contact us.

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About the Author

Dr Shane Oliver, Head of Investment Strategy and Economics and Chief Economist at AMP Capital is responsible for AMP Capital’s diversified investment funds. He also provides economic forecasts and analysis of key variables and issues affecting, or likely to affect, all asset markets.

Important note: While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This article is solely for the use of the party to whom it is provided.