Warren Buffet once said, “Be Fearful when others are greedy and be greedy when others are fearful.”
The world has certainly become much more uncertain in the last 24 hours. In the space of 90 minutes we had Prime Minister Morrison and Treasurer Frydenberg present the Australian Governments stimulatory packages to help offset the economic effects of the Coronavirus, followed by President Trump who delivered the US Government’s response and the ‘underwhelming’ response from the Europe Union (ECB).
For our positioning in your portfolios, we started the year very defensively, in quality assets across a diversified range of market sectors and security positions. We haven’t altered our general approach but have been tactically adjusting our positioning to adapt to the changing market circumstances and opportunities.
The quality of our portfolios is very high and the risk protection we have incorporated to guard against volatility has served us very well in recent weeks. We will continue to be tactical, adapting to the moves in markets. The Investment Committee’s macro positioning more broadly remains on the cautious side.
As the situation in equity markets is extremely fluid with political and economic responses changing on the hour, offering a definitive response or advice to you is difficult. Equity prices are significantly lower than the recent record highs, but the world is also dealing with a series of events that is to unknown to all of us, there may well be further deterioration in equity values in the coming months. Until there is a period of consolidation in global equity markets, and the flow of information from individual companies on the impact of recent events on their business is announced, currently trying to establish valuations for equities is very difficult.
Investors who sell shares now could lock in a ‘paper loss’ and lose the dividend income from Australian companies, which may be more attractive than the returns available on cash and some fixed interest investments, thanks to monetary policy. Then there is the problem of timing a return to the market, that would be “very difficult” given the volatile and uncertain climate. This could lead to missed opportunities that could erode long-term portfolio returns.
There is a lot of debate among market experts on whether it’s too early to start investing. While it’s extremely difficult to pick the bottom of the market, there sure is a lot of fear out there.
Get in Touch
Either way, in these times the value of getting investment advice is at its greatest. So if you have any concerns or wish to discuss your portfolio in more detail, get in touch with your Relationship Manager.