Your Super and the markets

February 28, 2020

Where to from here

 

There is a lot of noise and a lot of fear in the market place with the impact of the coronavirus. These fears have contributed to a significant market down turn, having a direct affect on Superannuation and Investment Portfolios.

 

Whilst the overall value of a superannuation and investment portfolios may have reduced, the cash and term deposits will not have reduced. Cash is a security and perhaps even an opportunity of capturing growth when the market returns.

 

The great Warren Buffet has a saying about the stock market and investing in general, “Be fearful when others are greedy and be greedy when others are fearful.” Warren Buffet

 

Morningstar has written a great article, the link is at the bottom of this email. In a nutshell, past outbreaks have left only a shallow impression on markets.

 

One month after the SARS outbreak in April 2003, the markets recovered with 8.7% returns, followed buy an annual return of 48.3%. One month after the Swine Flu in April 2009, returns of up to 12.3% where seen, followed by an annual return up to 58.7%. Some out breaks, such the first  Ebola outbreak in March 2014 took a little longer, but did produce positive returns within the first 3 months.

 

While I am not suggesting we will see an annual return of 58.7%, history shows that there is a good chance economies will recover from this epidemic.

 

Another great graph produced by Morningstar shows the market reaction to epidemics, you can see markets dropping with outbreaks, but over time, markets continue to grow.

 

 

For those who are interested in reading more of this article written by Lex Hall for Morningstar, please click on the following link, Coronavirus: Impact and Opportunity.

 

Importantly, the markets may continue to fall or be volatile while the coronavirus impacts more people and countries around the world. The decision to take advantage of the situation as a buying opportunity or to sell and limit your losses in the short term will depend on your personal situation.

 

I hope this provides you some piece of mind. If you would like to talk to our financial adviser, please feel free to call Raema on her mobile.

 

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