April 9, 2020: Live from the desk of our CIO, Piers Bolger

April 9, 2020: Live from the desk of our CIO, Piers Bolger

April 9, 2020: Live from the desk of our CIO, Piers Bolger 150 150 Piers Bolger

March ended one of the worst months we’ve seen on financial markets since the 1987 stock market crash.

Our local equity market was down just under 21% for the month. The A-REIT market was down 35% for the month which is incredible when you look at the performance of that part of the market over the last 18 months. Global equities fared a little bit better, in Australian dollar terms they were down roughly around 8.5%. The decline in the Australian dollar, not only against the greenback but against other major currencies, provided some support to investors in regards to the overall investment performance. Cash and defensive bond markets continued to provide that relative stability and downside protection across portfolios as we’ve gotten to see over the last couple of months.

We thought it’d be worthwhile highlighting the extent of the volatility that we’ve seen through February and March particularly. This chart shows the daily moves of our local equity markets since December 2007.You can see the extent by which the market moved over the course of February, and March relative to prior periods. Even relative to the GFC you can see it certainly was a lot higher, both on the highs as well as the lows.

From our perspective, when we look at that chart, it says two things. It says that we need to be very conscious of managing downside risk, and we’re very much focused on that in the way that we’re constructing our investment portfolios. Secondly, it does afford us the ability to look through a lot of the challenges we’re facing at the moment to think about where can we reposition portfolios. Where can we take advantages of some of the declines that we’ve seen in in markets, particularly equity markets, and reposition for growth.

Our core view still remains that we will ultimately overcome the challenges that we’re seeing. Economies will ultimately move back into a growth phase and that will be reflected in financial market performance. Certainly as we sit here today, the next three to six months or longer in a real economy perspective are going to remain very, very challenging. But given the extended fiscal stimulus that governments have provided as well as central bank support, we believe that ultimately that will be beneficial for economic development and industrial production, which will ultimately flow through in regards to financial market performance.

From a portfolio standpoint, we certainly remain very focused on that medium to long term horizon. We want to be able to capture that upside, not knowing when it’s going to occur but we don’t want to be too defensive in our portfolio positioning at this point in time, albeit we are certainly very much focused on managing the downside.

As always, please reach out to your advisor if you have any concerns about your investment strategy or your portfolios. We wish you a happy and safe Easter.

Piers Bolger is Chief Investment Officer at Viridian Advisory

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