Covid Positive for Markets & Superannuation

Covid Positive for Market & Super

“A small miracle occurred – markets started to recover”

Early in 2020, there was a level of optimism about investment markets. We had seen a number of years of consistently positive returns. The average investor in superannuation could be forgiven for thinking it was becoming the new norm. And then WHAM! Covid blindsided us and share markets plummeted from their previously dizzy heights. Our Australian market fell by around 35%, depending on which index you measured it by.

Some less experienced investors (and a few more experienced), thought that the sky was falling and abandoned their share portfolios to the safe haven of cash before the full force of Armageddon hit us head on.

Then a small miracle occurred… markets started to recover. And the recovery gathered pace, leaving the cashed-up investor with a short termism hangover. And possibly too shocked (or waiting for the right time) to get back into the market. Unfortunately, the investors who didn’t go back into the market, missed one of the greatest recoveries in share market history. And now… on a much smaller scale, we are seeing a similar event. Recent rhetoric from the press has been talking up the threat of steep interest rate rises. That’s like a really severe illness for investment markets. Sharp increases and even the threat of sharp increases in interest rates, pulls money out of the market into safer, less volatile investments. People tend to borrow less, companies and property owners have higher interest costs and there is less money to drive the economy.

There is no doubt that interest rates will have to increase at some point, but sharp increases in a short space of time are unlikely. Our own Reserve Bank governor – Phillip Lowe, came out last week, and poured some much-needed coolant on the doomsayers predictions, suggesting that whilst an increase in rates could happen this year, the economic evidence at this time wasn’t sufficient to support that view.

So, whilst Covid caused something of an initial shock, and the associated uncertainty caused a correction in share markets around the world, people suddenly realized that the world wasn’t coming to an end, and we were learning to live with the pandemic. The level of uncertainty was being reduced and confidence came back.

It’s too early this time around to say that the uncertainty has been reduced and confidence has returned. But what we can say is that a short-term view of the markets even in a rising interest rate environment, could be very costly. Take a positive long-term view of your super and investment portfolio – that’s a more certain way to achieve a better long-term return and financial independence. To use an old catch phrase in relation to the markets: “It’s time in, not timing”.

Written By Jamie Luxton

Jamie is the founder and manager of the practice, and has been working in the financial services industry since 1986. He holds a Diploma of Financial Planning, is a CERTIFIED FINANCIAL PLANNER® practitioner and a member of the Financial Planning Association of Australia. He is also a member of the SMSF Association, the Self Ma

naged Super Fund Professional Association of Australia which is recognised as the peak body for professional advisers and the leading association within the SMSF industry in Australia, and is an accredited Specialist Adviser in this complex field. Jamie also holds a Specialist accreditation in the area of Aged Care. Jamie is proud of the fact that many clients who started with Wealthwise more than 25 years ago remain clients to this very day. Jamie has an abundance of knowledge and experience in all facets of financial planning gained over the years, providing advice to many individuals and business owner clients.

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