Dear Sir/Madam,


Wow what a difference a few months makes!  Back in February who could have predicted that our current way of life was even a remote possibility. But here we are, knee deep in a COVID 19 world, wondering what the other side looks like and when this will all be behind us.


Some estimates suggest up to 300 million jobs have been lost worldwide and over 1 million in Australia, this year, with young people being the hardest hit. The global unemployment rate among younger (under age 25) is sitting at around 20%.  According to McKinsey, Global leaders in Management Consulting, the first two months of the crisis alone saw aggregate global stimulus measures announced totaling over US$10 trillion, which is three times more than the response to the 2008-09 financial crisis.  Global governments’ policy responses have been aimed at slowing the spread of Covid-19 to buy more time - so that the health sector is not overwhelmed, and in the hope that a vaccine(s) may be coming.  We expect next year to be a very difficult year economically as the world slowly gets on top of the virus and turns its attention to reopening for trade and rebuilding their battered economies.   


In the past six months the markets have experienced a wild ride. In Australia, our market dropped by 37%, and today six months later, the market has recovered 24% of the market fall and is continuing its climb. The rate of recovery this time is much greater than post GFC so far.


All of that recovery is in the backdrop of global business closures and unprecedented quarantine lockdowns. It’s not logical and doesn’t make sense but there are reasons why:

  1. People are extremely confident in the stock markets and want to buy shares that they know and believe in at discounted prices now even though the companies are not even operating.
  2. Governments are printing enormous sums of money and pushing them into their banking systems in order to prevent businesses and individual livelihoods from collapse. The debt is something they will worry about later in coming generations.
  3. Superannuation contributions continue and largely go into the markets which drives up prices.
  4. Markets are 'pricing-in' the eventual production of a successful vaccine. There is currently strong confidence globally in the imminent production of a COVID preventing Vaccine and therefore a return to ‘almost normal’ life. 
  5. Finally, interest rates are virtually zero and will be remaining at these levels for the foreseeable future. The millions of retirees around the world can no longer afford to meet their living expenses from bank interest and so they are forced into the stock market to seek better returns.


Tech companies have been a major driver of the buoyancy of world stock markets.  eCommerce has experienced the equivalent of ten years of growth in the past three months and with forced upskilling in technology and adaption to doing business differently, there is good reason to believe that the shift to eCommerce is more than a short-term fad.  


All of this is contributing to the support for the share markets around the world and this is likely to continue, albeit with a very significant amount of turbulence along the way and greater than normal fluctuations of dividends.


We are cautiously optimistic about the global sharemarkets over the next year and beyond. However, it is a complex and uncertain investing environment which is bound to experience substantial fluctuations in returns with the possibility of another significant correction around the corner. During these times it is critical that you stay invested for the following reasons:

  • It is near imposible to 'time' the markets (ie: get in and out of the markets with perfect timing). Trying to do so normally results in more harm than good. 
  • The future is impossible to predict. 
  • Markets are forward looking and look to factor in the next ten years and beyond. This has been illustrated historically as there have been many years during which stock markets have rallied as the economy has performed poorly. There are also many years during which the economic data was strong, but stock prices were weak. No one can reliably predict which of these scenarios is more likely to occur. 

 

Even if we see a significant fall in markets, take heart in knowing that you are a long-term investor and those falls present a rare opportunity for your fund managers to reposition their blue chip asset holdings at much cheaper prices for you to benefit from on the other side, as the inevitable recovery takes place. This is a long game and we have chosen the champions of industry as your investment managers to allocate for your long-term profits (7 years or more).


At the end of the 2020 financial year we are proud to say that your Separately managed accounts (SMAs) were top quartile again and were typically placed in the top five highest super returns in Australia. We are very proud and grateful of the consistently excellent job our investment committee and asset consultants are doing for you to build wealth and protect you during uncertain times like these.  We are making changes to your portfolio as we speak so stay tuned for a further email in this regard.

 

Unclaimed money

Did you know that the Government is holding millions of dollars of unclaimed money owned by the public?  There may be some there with your name on it!  Visit https://moneysmart.gov.au/find-unclaimed-money  Every dollar helps at the moment.

 

Chrysalis News

After 2 years advising with Chrysalis, Mark has moved on to another opportunity.  Mark has been a valued member of the team and we thank him for his contribution and wish him well.  We are in the process of recruiting for a new senior adviser.  There are more new faces joining the growing Chrysalis team.  We'll introduce them to you in coming Newsletters and when you come in for your review.  Please be assured that we are all working long hours to look after you and your assets during the pandemic.  


We are acutely aware that many of our clients, especially those employed by Qantas and living in Victoria, are doing it tough right now and facing very difficult decisions.  We are also thinking of all our clients concerned about the safety of elderly parents and relatives.  We want to say that we are there for you and are on standby to help you in any practical way we can.  This is a time to come together and support each other.  Please contact us if you have any questions or if we can help you in any practical way - financial planning related or not.  We will get through this together.

 

Chrysalis Lifestyle Planning

Chrysalis Advice team

Chrysalis Lifestyle Planning

Website: www.chrysalislp.com.au

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