Coronavirus impacting global share markets May 20, 2020

Asia Pacific Stock Exchange on board, display or monitor - selective focus

18/5/2020

This calendar year, the Australian and global share markets have been responding to the spread of Coronavirus outside of China and to concerns about the impact this could have on the global economy.

Earlier this year, sharemarkets around the world fell significantly. The Australian All Ordinaries Index fell by over 35%. While markets are currently higher than they were earlier in the year, there is still a significant amount of volatility.

What’s driving the volatility?

Markets are responding quickly and dramatically to all COVD-19 related news and all economic related news. Unfortunately, there is still significant uncertainty surrounding the health, social and economic impact of the virus. This means there is no way to predict when good news or bad news will be released, or the extremity of the news that is released on a day to day basis. So when markets become aware of new information, positive or negative, they react quickly and in many cases significantly.

Some of the news that drives positive and negative reactions from the sharemarket include:

  1. Updates regarding COVID-19 case numbers, mortality rates, steepening or flattening of the infection curves both here and abroad
  2. Indications from Federal and State Governments regarding the intention to relax or tighten lockdown measures
  3. Reactions of Governments overseas to the virus, particularly USA
  4. Numbers of people becoming unemployed as a result of COVID-19, both here and overseas
  5. Economic statistics such as business and consumer confidence, expenditure, earnings and investment
  6. Economic forecasts in terms of future jobless rates, business earnings, rental evictions and mortgage delinquency

Intrust Super’s investment portfolios are well diversified across domestic and global asset classes and, we believe, suitably placed to ride the ups and downs of volatility. In addition, as scary as it can be, market volatility can provide opportunities for our investment managers to identify mispriced stocks, acquire assets at lower prices and position for market recovery.

Superannuation funds such as Intrust Super have proven to be highly resilient during global disruptions such as Y2K, SARS in 2003, the Global Financial Crisis from 2008, Zika 2015 and Ebola in 2018. This is potentially due to the well-balanced asset portfolios, and the longer-term focus of superannuation investment strategies.

You can view the returns of Intrust Super’s investment options here.

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