Market Update – April 2020
06/04/2020
Both sides of the technology sector coin
19/05/2020

Affinity Insights – Issue 12 April 2020

Issue 12, April 2020

From the MD's Desk

By Rodney M. DeGabriele – Principal & Managing Director 

Amidst all that is happening in our local neighbourhoods, Australia and across the globe, we are experiencing uncharted territory, by not being able to watch our code of Football, not taking holidays, to finally not visiting our local entertainment venue and conversing with friends over a nice glass of wine and a beautifully cooked meal. COVID-19 is a virus that started in China just three and a half months ago, to now having spread to all continents around the globe and being declared by the World Health Organisation as a pandemic just three weeks ago.

I stress the importance for us all to take note of the safety and preventative social distancing measures that our government put into place as this will assist in flattening the curve of new persons contracting this pneumonia like virus. It is of course a very stressful time for us all, but like no other time in history, we need to not only protect ourselves, but also consider our neighbour.

Whilst we all feel a sense of anxiousness due to all of the uncertainty, I would like to reassure you, our commitment and dedication from all of us here at Affinity has never been more evident. We have spent the better half of six weeks devising ways to increase our level of communication during these market conditions, and our primary objective is to ensure we protect our clients investment capital at all costs. We are speaking with our Investment Committee several times a day to gain the most up to date market insights on how to best counter or take advantage of the tumultuous equities markets.

I must stress again, we must all remain vigilant during this time and keep our spirits high. Take this opportunity to do things around the home and enjoy the outdoors whilst we can by going for walks and staying healthy. Remember to keep your distance from anyone that you do not live with, and don’t forget to maintain communication with your friends, family and elderly loved ones; as its imperative we all make a conscious effort to reduce the feeling of loneliness and isolation.

If at any time, you are concerned about any matter and wish to discuss it with us, please do not hesitate to contact Alison, Wendy, Phoebe, Marlene or Jon on our office number 1300 769 304. Alternatively, I can be contacted on 0488 993 175 and Tony on 0421 344 238.

Thank you for taking the time to read this edition of Affinity Insights.

 

Introducing Jessica Genovas

Jessica has recently completed her Bachelor of Commerce at Monash University and is currently studying her Master of Financial Planning. Her previous experience at a boutique financial advisory firm as a Client Services Officer and Junior Paraplanner have given her a good grasp in the world of financial services. She is motivated, enthusiastic and approachable and joins the Affinity Team in Advice Operations. Jessica is a foodie and when she isn’t working, she enjoys baking, trying out new restaurants and going for walks.

We would like to welcome Jessica to the Affinity team and wish her all the best.

Market Update - Still Cautious

It has been around two and a half weeks since our last Market Update. It feels a lot longer. The speed at which new information is being revealed is unprecedented. Market moves during this time have reflected this. The initial move down was the fastest in history. Daily volatility has been extraordinary. Markets don’t know where they want to go, but they will get there quickly.

We rounded out our last Update by highlighting the binary nature of potential outcomes. Either:

  1. If evidence builds that the measures Italy has taken are sufficient to halt the spread of the virus, and they can begin to re-open their economy combined with the meaningful stimulus now in the system, the scene could be set for a meaningful rally in equity marketsor
  2. “If evidence builds that the economic system is too fragile to handle this crisis, we will likely remain cautious on equities and may reduce exposure further.”

So far, the balance of probabilities hasn’t really shifted in either direction.

To continue reading our latest Market Update please click here

Avoid Panic Selling

Hamish Douglass, Chairman and CIO of Magellan Financial Group has recently called for calm during this period and urged investors to avoid panic-selling.

During his discussion with Glenn Freeman from Morningstar last week they addressed the topic of COVID-19 and its impact on Magellan’s investment strategy. He stated that Magellan were relatively fully invested coming into the coronavirus, with their major change in position occurring at the beginning of 2019 when they changed their view on what the Fed was likely to do with interest rates.

He questions the scale of this pandemic and believes it is too early to call. However, emphasises that you don’t hold cash in the fear that a pandemic is going to happen even though it’s going to happen, as you don’t know whether it’s going to be next year or 20 years away. He refers to 2003 where investors were selling out right in the middle of SARS occurring, believing things were going to get worse. If many had done that, looking back it would have been a very costly exercise.

He reiterates that Magellan are not panic selling out. He understands the market will be extremely volatile in the next three months and hopes to take advantage of that. Stocks that are currently down 20-30% pose as good entry points and this can be funded by selling stocks that are less affected or using their cash reserves.

He believes when we look back in 12 months’ time this is going to have relatively little impact. The most likely impact is going to be lower interest rates, and lower interest rates prevailing is going to drive higher valuations for businesses as we come out of this. So, selling out of markets with interest rates going down because you’re panicked by social media and toilet paper reaction may be unwise for anyone who has a slightly longer term investment perspective.

#spendwiththem

#spendwiththem

2020 has been a rollercoaster of a year. Throughout January and February, we fought as a nation against the raging bushfires and bonded together to help those most in need. We supported rural and local businesses by helping them get back on their feet.

Now we have been hit with the looming pandemic of COVID-19. The government has pleaded for the importance of social distancing and banning large group gatherings and most of us have also been vigilant and stayed in our homes when going out is not a necessity. As if they weren’t already struggling from the January bushfires the retail, food and beverage and events industry have been dealt with another blow.

Below are some ideas of how you can help, whilst adhering to the social distancing rules

  • Buy a gift voucher to your favourite restaurant to use later 
  • Buy gym passes or exercise classes to redeem later or subscribe to online classes
  • If you are working from home, take a break and walk to your nearest café for a takeaway coffee
  • If you have purchased a ticket to a musical or play, consider not asking for a refund as many artists are now out of work for an undefined period
  • Whilst our supermarket shelves are empty many restaurants are still in operation. Give your local restaurant a call and order take out. Many are now offering this service, with some even doing drive-by deliveries where you can wind down your window and they will pass your meals into your car.

As we helped each other during the bushfires, we must once again come together during this crisis.

Looking after your wellbeing during this time

Recently lockdown rules have forced gyms and fitness studios to close their doors. But as we know, incorporating exercise into your daily routine is crucial to your overall wellbeing, so gyms and fitness pros have come together to offer their services online. Here are some of our top picks.

  • Fitzroy’s Good Times Pilates is running online classes three times a day at 8am, 10am and 5pm. Book in for a class here.
  • Power Living has an online platform, Yogaholics, offering 24-hour access to yoga and meditation classes, ranging from five to 90 minutes in length, for $12 a month.
  • Chris Hemsworth, better known as Marvel’s Thor has created a fitness app, CENTR which includes workouts, mindfulness routines and recipe plans.
  • Headspace introduces meditations and exercises that will teach you the essentials of mediation and mindfulness

Here at Affinity we have set up a steps challenge to ensure we are moving everyday. Something you can consider doing with family and friends even if you cannot see each other during this time.