The Australian Sharemarket (as measured by the ASX200) was down 10.9% in 2019/2020. While a large drop like this is never nice, a closer look at the whole year in chart form shows how much worse things could have been!
The first 7.5 months of the financial year were unremarkable. Largely within a narrow range for the last half of 2019, the market seemingly became overpriced in January 2020 as it passed pre-GFC highs. The ASX seemed 10 feet tall and bullet proof. At this point in Australia, Corona was only a Mexican beer or the odd weathered Toyota seen occasionally on our streets.
COVID-19 began to take hold in Australia in February, and this saw the most volatile sharemarket action in decades. The VIX (the volatility index), a measure of ASX volatility, reached higher points than at any stage during the GFC some 10 years earlier. From peak to trough, the ASX200 fell a massive 38%! However, it was the pace of the fall that was most fascinating. Markets fell further during the GFC, but over months and years. This 38% fall was done in the space of a month!
Rapid government action and massive global stimulus response put a floor under the market in mid-March, and a swift recovery has occurred ever since.
Many investment portfolios and super funds will have experienced negative returns for the 2019/2020 financial year, and perhaps yours is no different. Your annual super statements will no doubt be received soon and some of you may be shocked at the last year’s returns. If you aren’t sure if your fund has performed well or not considering the circumstances, seek advice to investigate if your money is working as hard for you as it should be. We have previously discussed the things to look for, here.
Where To From Here?
In my view, things get even more interesting from here. I’d be reluctant to say that investment markets will continue onwards and upwards. Continued volatility is likely. I will watch closely the upcoming earnings season to see the impact of shutdowns on major companies, how the economy copes with the rolling back of some stimulus measures in September (mainly JobKeeper) and the likelihood of our banks returning to paying dividends.
It has been a tough year for investors, and it’s likely that an economic recovery will take many years. As always, we remain optimistic for better times ahead and our investment philosophy remains unchanged.
If the roller coaster scares you and you need someone to scream with, contact us for assistance in navigating the way back up.