Learnings for Aussie equities investors as a shutdown looms

March 21st 2020

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The lockdown measures in Australia are at their beginnings, sending markets into a meltdown. For nervous holders of Aussie equities, it’s worth remembering there are two situations to brace portfolios for: the course this pandemic will run, and the inevitable recovery.


Getting the facts right

Though the number of cases in Australia of COVID-19 seem relatively low compared to global counterparts, this virus is spreading quickly through a global population with no immunity, and faster than modern medicine and governments can keep up.

Australia is rated as one of the countries most prepared to cope with the outbreak1, but it needs to be paired with a rapid response plan. Masses of people requiring treatment all at once – when regular flu season is on approach – is a significant consideration and concern.

Like much of Europe and Asia, Australia is also resorting to the basics to stagger the impact of the virus on its healthcare system – social distancing, isolation and quarantine.

The relatively sudden and highly disruptive impact on normal social functioning is, of course, having an impact on the companies and services which have enjoyed a period of predictable demand and a long bull run.


What we’re bracing for

Australia may soon need to make more pronounced moves to reduce the spread. This may include tougher travel restrictions and school closures. These decisions, if taken, would rightly put health and well-being outcomes ahead of economic ones but would come with more market volatility.

Further, we expect now that Australia will experience two consecutive quarters of negative growth, causing the first recession since the early 1990s.
Though it’s hard to fathom at the moment, there is one important event we are bracing for also: a recovery.

As it stands, shares are likely to see further short-term falls given the uncertainty around COVID-19, both in terms of the duration of the outbreak in Australia and worldwide, and the extent of its economic impact even in the case of containment. However, for the next 12 months, we expect total returns to be helped by an eventual rebound in growth and supportive policies.

Measures we can reasonably expect from the government and central bank include:

It’s important to remember both of the realities to realise the panic will endure, and it will also end. Now is the time for careful, rational and long-term strategies to be an absolute focus, to ensure we get through this period without wearing the cost long-term.


Some golden rules

Here are some golden rules we are considering:


If you have questions or concerns about this, reach out. We are here to help.

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Source: AMP Capital

Important notes

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)  (AMP Capital) 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 and must not be provided to any other person or entity without the express written consent of AMP Capital.