Hot Issues
spacer
Covid-19 resources
spacer
Our Website, your resources
spacer
Light at the end of the coronavirus tunnel
spacer
Market update
spacer
Changes to pension drawdown and deeming rates
spacer
Preserving retirement saving during COVID-19
spacer
How investment market volatility could affect your super
spacer
COVID-19: Early Childhood Education and Care Relief Package
spacer
The coronavirus pandemic and the economy – a Q&A from an investment perspective
spacer
Money challenges women face
spacer
Data so large it's hard to comprehend.
spacer
Is coronavirus driving a recession, depression or an economic hit like no other?
spacer
Holding your nerve – why retirees fear a market plunge
spacer
Historic $130bn wage subsidy to cover 6 million workers
spacer
Stage 2 – Covid-19 stimulus package.
spacer
Covid-19 Update - Small Business
spacer
PM launches $17.6 billion virus stimulus plan
spacer
The plunge in shares – seven things investors need to keep in mind
spacer
Three reasons why low inflation is good for shares and property
spacer
Can refinancing my home loan save me money?
spacer
Expected GDP by country 2010 to 2100
spacer
Super investment options – what’s right for you?
spacer
Life beyond work
spacer
Statistical picture of Australia - Update
spacer
A resource hub for our clients.
spacer
Market Update
spacer
Real Time World Population Growth - Wow!!
spacer
Dividends explained
spacer
Start 2020 with a best snapshot of Australia.
spacer
5 tips for green investing
spacer
Make Australians save again
spacer
Bushfires and the Australian economy
spacer
Grow your super in the new year
spacer
Australia by the Numbers
spacer
How to create realistic goals…… and stick to them.
spacer
5 days to get your finances in order
spacer
Our Advent calendar for 2019
spacer
5 reasons why I’m not so fussed about the global outlook
spacer
Superannuation changes
spacer
You'll be the life of the party when armed with this information!
spacer
7 tips to improve your financial wellness
spacer
Rebooting for retirement
spacer
5 reasons why the A$ may be close to the bottom
spacer
Resist today, relax tomorrow
spacer
Market Update 30 September 2019
spacer
How much superannuation is enough?
spacer
All Australia's vital statistics - October 2019
spacer
6 new financial videos
spacer
DGP by country since 1800
spacer
Boost savings with compound interest
spacer
High times for low interest rates
spacer
Market Update - September 2019
spacer
Will the world slip up on oil again?
spacer
Australia by the numbers - September 2019
spacer
Spending money in a cashless world
spacer
Dealing with being cash poor and asset rich
spacer
Saving for a rainy day
spacer
Market update
spacer
Access to more resources and tools than most websites.
spacer
Nine reasons why recession remains unlikely in Australia
spacer
Can I go back to work if I’ve accessed my super?
spacer
How's Australia doing statistically?
spacer
Protecting your super package.
spacer
Making the most of record-low interest rates.
spacer
Market Update 2019
spacer
How the top 10 global companies have changes since 1998
spacer
The longest US economic expansion ever
spacer
When can I access my super
spacer
Australia by numbers – Update
spacer
How to retire early
spacer
How to play catch up with your Super
spacer
Inflation undershoots in Australia
spacer
9 money mistakes to avoid in retirement
spacer
What a financial planner does to help.
spacer
Australia's vital statistics.
spacer
What kind of money parent are you?
spacer
How to save money
spacer
Federal Budget 2019 - Overview
spacer
How the 2019 Federal Budget affects you
spacer
New Global growth slowing, plunging bond yields & inverted yield curves
spacer
Women and Money
spacer
Market Update - March 2019
spacer
The problem with getting to 53 years of age.
spacer
How to avoid a travel debt hangover
spacer
Things to avoid as a newbie investor
spacer
Budget Time - How's Australia going?
spacer
Most older Aussies prefer home care over a nursing home
spacer
Why growth in China is unlikely to slow too far
spacer
10 money conversations to have when your relationship heats up
spacer
Australia slides into a 'per capita recession'
spacer
6 steps to get your money stuff together
spacer
All you need to know about how Australia is going.
spacer
Australian housing downturn Q&A
spacer
6 ways to reduce your credit card debt once and for all
spacer
5 life insurance questions you've always wanted to ask
spacer
2019 a list of lists - regarding the macro investment outlook
spacer
Part 4 - The major benefit of ‘behavioural coaching'
spacer
How to adult—a quick guide to personal finances in your 20s
spacer
How Australia is performing.
spacer
The Australian economy in 2019
spacer
Holiday budgeting tips— How to avoid a travel debt hangover
spacer
Australia - a comprehensive run-down of our vital statistics.
spacer
The Fed and market turmoil - the Fed turns a bit dovish but not enough (yet)
spacer
12 ways to avoid waste this Christmas
spacer
Rising US interest rates, trade wars, the US midterm election results, etc
spacer
Our Advent calendar for 2018
spacer
Responsible and ethical investing
spacer
What are the 3 biggest living expenses for households?
spacer
Your Adviser and Behavioural Coaching
spacer
Stop!! Don't do a paper Budget, use our online budgeting tools instead.
spacer
Information needed to be the BBQ expert.
spacer
Would you like to retire by 40?
spacer
The property cycle and the economy
spacer
How financial advice helps create wealth.
spacer
7 money personalities you may identify with or want to avoid
spacer
Are shares expensive?
spacer
How's Australia doing statistically?
spacer
Super investment options – what’s right for you?
spacer
Here's how to lead a happier life
spacer
What happened to all the worries about rising inflation and bond yields? Goldilocks, tariffs, Turkey & other things
spacer
Is it better to buy an investment property or home first?
spacer
Nine keys to successful investing
spacer
This information will turn you into a fireside expert.
spacer
How Australians will use their tax return
spacer
Lessons from the blue zones: secrets of a long life
spacer
Trumponomics and investment markets
spacer
Tools for budgeting, cash flow, Super and more ….
spacer
How much super should I have at my age?
spacer
How tax deductible personal super contributions work
spacer
The rise of the gig economy and side gigs (thanks to technology)
spacer
Statistics for all Australians
spacer
Watch out for tax scams
spacer
After the Australian household debt and east coast housing booms
spacer
Now’s the time for tax planning
spacer
Why it pays to contribute to your partner's super
spacer
Australia by numbers – Update
spacer
How to deal with financial stress – nearly 1 in 3 affected
spacer
Federal Budget 2018 – Overview
spacer
Your Budget
spacer
4 components of our 2018 Federal Budget
spacer
US China trade war fears – Q & A
spacer
Tools to help you manage your financial position are available on our site.
spacer
7 ways to boost your super
spacer
Australians reveal their priority goals
spacer
Australia by numbers – Update
spacer
Your retirement questions answered
spacer
How to make money by turning your unwanted goods into cash
spacer
Our website is really our digital office.
spacer
Bitcoin – is it really for you?
spacer
Spread your money, reduce risk
spacer
Love and money? It’s not about control
spacer
The pullback in shares - seven reasons not to be too concerned
spacer
Australia. All you need to know to be the expert.
spacer
Australian’s love affair with debt - how big is the risk?
spacer
5 ways to keep a cool head in a falling share market
spacer
2018 – a list of lists regarding the macro investment outlook
spacer
Sports lovers enjoy better financial fitness
spacer
Where Australia is at. Our leading indicators.
spacer
The year that was and the year ahead
spacer
Add some extra cash to your New Year
spacer
New year, new financial resolutions
spacer
Our Advent calendar for 2017
spacer
Where are we in the global investment cycle?
spacer
Australia's vital statistics
spacer
12 ways to enjoy summer without spending a fortune
spacer
One in three Aussies travel without protection
spacer
Digital payment options could see you spend more this Christmas
spacer
If you’ve always thought property prices only go up…
spacer
Will Australian house prices crash?
spacer
Where are we in the global investment cycle and what's the risk of a 1987 style crash?
spacer
Money steps for women
spacer
Resources on our site to help you, your family and your friends.
spacer
Australian Dietary Guidelines and healthy eating chart (PDF)
spacer
How to retire, your way
spacer
Prepare for retirement without missing out today
spacer
Be the boss of your cash
spacer
The Australian economy bounces back again
spacer
Should you lend money to family?
spacer
Money mistakes people make in their 50s and 60s
spacer
Australian Dietary Guidelines and healthy eating chart (PDF)
spacer
Eight steps to improved cashflow... and lifestyle
spacer
Powerful Budgeting, cash flow and Super Tools available on our site.
spacer
5 ways Australians will use their tax return this year
spacer
Australia's leading causes of death - ABS
spacer
The threat of war with North Korea
spacer
Six traits of Australians living the dream
spacer
The break higher in the Australian dollar is likely to be limited
spacer
Money can buy you happiness, you’re just spending it wrong
spacer
Key Economic Indicators, 2017 – updated
spacer
Helping your kids buy a home
spacer
From Goldilocks to taper tantrum 2.0
spacer
What’s your debt age?
spacer
Doing a budget is a good idea but ....
spacer
Planning is the key to making it financially
spacer
What to do when you come into money
spacer
Managing your money when you move in together
spacer
Reduce your bills with these household items
spacer
It pays to contribute to your partner's super
spacer
How to cope with losing independence
spacer
Transition to retirement income streams
spacer
The Australian economy hits another rough patch
spacer
Watch out for tax scams
spacer
The three core pillars of this year's budget
spacer
Federal Budget - 2017-18 - Overview
spacer
Federal Budget - 2017-18 - Budget documents
spacer
Make the most of the current super caps
spacer
Five, four, three… it’s not too late to get more in super
spacer
Super changes are coming
spacer
What’s your debt age?
spacer
Australian cash rate on hold
spacer
Super changes this financial year - Dr Shane Oliver - video
spacer
The door is closing on super’s current caps
spacer
Is Donald Trump's honeymoon with investors over?
spacer
Estate planning and why you need a super plan
spacer
What does a comfortable retirement look like?
spacer
Give your career a health check
spacer
Super changes from July 2017
spacer
Changes to the Age Pension assets test
spacer
Keep your money safe over the silly season
spacer
Looking ahead at 2017
spacer
Review of 2016, outlook for 2017 - looking better despite the political noise
spacer
Merry Christmas for 2016, a Happy New Year and a prosperous 2017.
spacer
54.2 million worries
spacer
Five tips for happy healthy ageing
spacer
Thinking about managing your own super?
spacer
Sending more to the tax office than you should?
spacer
Government pulls back on proposed changes to super
spacer
Market Update - What to consider when investing in a low return world
spacer
Stop!! Don't do a paper Budget, use our online budgeting tools instead.
spacer
Oliver's Insight - Megatrends
spacer
Value of Advice
spacer
A growing family doesn't have to blow the budget
spacer
Blinded by optimism
spacer
Thinking about managing your own super?
spacer
The investment outlook - it's not all that bad!
spacer
What’s your biggest obstacle to financial success?
spacer
Ageing Parents
spacer
Should you own the roof over your head?
spacer
Be a senior entrepreneur on your own terms!
spacer
Brexit and other key developments
spacer
Brexit wins
spacer
Commentary on major issues - AMP
spacer
Five money habits for a happy financial year
spacer
Remember to factor in parental subsidies at tax time
spacer
Are grandparents giving too much?
spacer
2016-17 Federal Budget - AMP
spacer
2016 Budget in detail
spacer
How (and why) to talk to your adult children about insurance
spacer
Procrastination: Just do it. Eventually.
spacer
Why Australian property won't collapse
spacer
The Lucky Country holding up pretty well
spacer
Have we reached the bottom?
spacer
The evolution of the Chinese consumer
spacer
Retirement rolls around faster than you think
spacer
Pressed for time?
spacer
Changes to the Age Pension assets test
spacer
Women are building financial intelligence
spacer
Heirlooms no more
spacer
Initial market falls precede stronger returns - Shane Oliver
spacer
What exactly is income protection insurance and do I need it?
spacer
A rough start to the year, which could have further to go
spacer
Aged Care - Changes to Assessment of Rental Income
spacer
A bump in the road, then a new start
spacer
New year, new start – are you ready for retirement?
spacer
Review of 2015, outlook for 2016 - Dr Shane Oliver
spacer
We wish you a Merry Christmas for 2015 and a Happy New Year
spacer
Go easy on the plastic over Christmas
spacer
Resolutions for a wealthy future
spacer
The Australian dollar doing what it normally does - overshoot. Dr Shane Oliver
spacer
How to manage volatility in a low return world
spacer
The Australian economy - more help will be needed. Dr Shane Oliver
spacer
Insurance through my super
spacer
Four tactics to build an investment portfolio
spacer
The demand for global infrastructure
spacer
Help achieve your investment goals with dynamic asset allocation
spacer
The Power of Budgeting
spacer
Jump retirement hurdles with a coach
spacer
Preparing for the time of your life
spacer
A Super Loan for all reasons
spacer
Making a smooth transition
spacer
Budget 2015 - some professional opinions
spacer
Australian Government - Budget 2015
spacer
Achieving a comfortable retirement
spacer
Is off-the-plan on the money?
spacer
Should I take my super as a lump sum or not?
spacer
Do you have a key person in your business?
spacer
Tips for success in a competitive job market
spacer
All you need to know about buying at auction
spacer
To sell or not to sell?
spacer
Saving in a material world
Light at the end of the coronavirus tunnel

What does it mean for investors?

Dr Shane Oliver
Head of Investment Strategy and Chief Economist, AMP Capital 

 

       

Key points

  • After a strong rally, in the short-term shares are vulnerable to bleak economic and earnings news. 
     
  • However, positive news on the coronavirus outbreak is starting to get the upper hand – with evidence of curve flattening, an easing in lockdowns and massive policy stimulus pointing to a possible return to growth in the second half, which should ultimately underpin a rising trend in share markets beyond short-term uncertainties.

Introduction

The blanket coverage of coronavirus and its impact on the economy can lead to a lot of confusion right now. Some reports are hopeful of anti-viral drugs, others say a vaccine is at least a year away. There is talk of curve flattening but still rising cases and deaths. There is news of an easing in lockdowns but also worries about “second waves”. All this against a backdrop of collapsing economic data and surging unemployment. Some prognosticators say now is a great buying opportunity for investors whereas others see more financial pain ahead. This is a horrible time for humanity and particularly those directly affected by coronavirus, but I must say if ever there was a time to turn down the noise and listen to The Carpenters or Taylor Swift, this is it. Here is a summary of where we are currently at. First the bad news and then the good. I will keep it simple. 

The bad news

  • The reported number of coronavirus cases globally is still rising and has now gone through 2.5 million.
  • The reported death rate is still rising and is now up to 6.9%.
  • Many worry about a “second wave” of cases. This occurred in the 1918 Spanish flu outbreak, and Singapore and Japan which had been cited as models for containment are now cited as examples of this (although they really still seem to be in part of a first wave as their quarantining efforts failed).
  • Most medical experts still say a vaccine may be a year or more away. I remember around 1984-85 constantly hearing a vaccine for HIV was a year away – but we are still waiting.
  • In the absence of a vaccine some worry about coronavirus outbreaks every winter as it migrates around the world.
  • Economic activity data is literally falling off a cliff. This was highlighted last week by the IMF’s forecast for a contraction in the global economy of 3% this year and in advanced economies of around 6%. And this masks a likely 10 to 15% slump in GDP centred on the June quarter. Falls of that magnitude have not been seen since the Great Depression. The collapse in economic activity in the US and Australia is highlighted by weekly economic activity trackers we have constructed based on data for things like restaurant bookings, energy usage, confidence, foot traffic and jobs.

Australia & US Economic Activity Tracker

Source: Bloomberg, AMP Capital

  • We are constantly hearing forecasts of unemployment going to 10%, 15% and maybe even 30% in the US (which does not have the benefit of Australian JobKeeper wage subsidies – if you are having a salary paid by JobKeeper then you will not be unemployed).
     
  • This in turn is creating much consternation around whether there will be an economy left once the shutdowns end and/or how governments will get their debt down.
     
  • Finally, the blame game is on. While partly politically motivated, US China tensions seem on the rise again.

The good news

  • While the total number of coronavirus cases is rising, new cases appear to be levelling off or in decline.

Coronavirus confirmed cases worldwide

Source: Worldometer, AMP Capital

  • Numerous European countries, led by Italy, look to be following the same path as China which saw a blowout in new cases, a lockdown followed 2-3 weeks later by a peak in new cases and then falling new cases. Australia appears to have been very successful in following this path (with the peak coming faster) and the US now seems to be following the same path, albeit its yet to show a decent downtrend in new cases. Social distancing clearly works! (Just out of interest – with various countries following the same pattern China has reported it makes me think the Chinese data on new cases is roughly right despite emerging scepticism.)

Italy: Coronavirus daily change (new cases)


Daily Change (New cases): US & Australia

Source: Worldometer, AMP Capital

  • Following this, the focus is shifting towards an easing of lockdowns. Various European countries and New Zealand have already announced some easing, allowing some shops to open/activities to occur. The US has released guidelines for states to move through a three phased reopening if they meet various criteria (in terms of falling new cases & hospitals coping) before moving to each new phase.
     
  • While Australia’s PM Scott Morrison has indicated that current restrictions will remain broadly in place for another few weeks, he has indicated three criteria for an easing in restrictions: better testing; better contract tracing; and confidence in containing outbreaks all of which makes sense given the risks Australia faces coming into winter. Of course, successful anti-virals and/or a vaccine would make it all a lot easier, but we can’t rely on either just yet.
     
  • Most countries talking of easing are well aware of the risk of a second wave (although President Trump’s bravado about “liberating” states is worrying). Hence a focus on phased easing only once certain criteria – around testing, new cases and quarantining - have been met. This is very different to what happened in relation to Spanish influenza where there really wasn’t any testing. For Australia this is likely to mean a gradual opening up from May. In the absence of a vaccine, full international travel is likely to be the last thing to return. That’s not great but given that in net terms its worth less than 0.5% of GDP to the Australian economy, it’s trivial compared to the 10-15% hit that’s come from shutting or partially shutting about 25% of the economy as it would be this mainly domestically driven activity that would bounce back as the shutdown is eased.
     
  • Fiscal and monetary stimulus has been ramped up to the point that they should help minimise second round effects on economies enabling them to bounce back faster. This is particularly the case in Australia where the focus has been on job subsidies to preserve jobs, support businesses and low-cost RBA funding has enabled banks to offer loan payment holidays. Yes, there may be longer term issues in paying down debt, but they are small compared to the cost of allowing a bigger and deeper hit to the economy from not protecting businesses and incomes through the shutdown.

If, as appears likely, an easing of the lockdowns becomes common place in May/June, then April or maybe May should be the low point in economic data much as February was in China. This does not mean that things will quickly bounce back to normal – some businesses will not reopen, uncertainty will linger, debt levels will be higher and business models will have to adapt to different ways of doing things around working and shopping. On our forecasts it will look like a deep V recovery in terms of growth rates, but looked at in terms of the level of economic activity it will take a lot longer to get back to normal and this will mean that it will take a while to get unemployment down – from a likely peak in Australia of around 10%. But at least growth will be able to return and spare capacity and high unemployment will mean that it will take a while for inflation to pick up and so low rates will be with us for a long time. 

This is all very different to five or six weeks ago when there was talk of six-month lockdowns, no confidence as to whether they would work and the policy response was seen as inadequate. 

What does it mean for investors?

From their high in February to their low around 23 March, global shares fell 34% and Australian shares lost 37% as all the news was bleak. Since that low to their recent high, shares have had a 20% plus rally helped by policy stimulus and signs of coronavirus curve flattening. But this strong rally has left them a bit vulnerable in the short term – particularly as we have now entered a period which is likely to be see very weak economic data and news on profits. The ongoing dislocation in oil prices – to a “record low” of -$40 a barrel for West Texas Intermediate – has added to this, although lower petrol prices are ultimately more of a help than a hindrance to a recovery in economic activity. So, the very short-term outlook for shares is uncertain and a re-test of the March low cannot be ruled out. 

However, shares are likely to be higher on a 1-2 year horizon as evidence of curve flattening, easing shutdowns combined with policy stimulus ultimately see a return to growth against a background of still very low interest rates and bond yields. 

From a fundamental investment point of view the historical experience that covers recessions, wars and even pandemics (in 1918) tells us that the long-term trend in shares and other growth assets is up and that trying to time bottoms is always very hard. No one will ring the bell at the bottom, which by definition will come at a time of maximum bearishness when all the news is horrible. Maybe the low was back in March, maybe it wasn’t. To borrow from John Kenneth Galbraith’s famous quote on forecasters I will admit that I know that I don’t know.i So a good approach for long-term investors is to average into markets after bear market falls over several months. 

 

i “There are two kinds of forecasters: those who don't know, and those who don't know they don't know.” JK Galbraith. 

 



Important note: While every care has been taken in the preparation of this document, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) make 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 document 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 document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This document is solely for the use of the party to whom it is provided.