Getting Perspective On Markets
Is the bad news priced in?

It is an understatement to say that COVID19 has taken us on a wild ride.

Describing the market response to the pandemic as unprecedented is not hyperbole, with the VIX index of volatility touching 75 in recent days having only peaked at 60 during the Global Financial Crisis.

In the last month US stocks have fallen 27%, a faster start to a market correction that 2008, 2000, 1998 or 1987. This has been followed by wild swings in response to substantial monetary and fiscal stimulus around the world, with the Australian market recently experiencing a previously unheard-of 12% intraday movement.

We have all been inundated by bad news, but as advisers we see the importance of taking a balanced perspective.

We remain committed to long term investing and believe that if your long-term goals have not changed, there is no benefit in radically changing investment strategy in response to short term market movements.

We also believe that in periods of extreme volatility, it is very difficult to achieve execution at fair prices.

However, as you know we are not set and forget investors and our investment committee established last year is working around the clock not only to identify long term structural changes which may necessitate action, but also opportunities. That is why in addition to our strong belief in the benefits of low cost, broad diversification of index investing, we also invest in exceptional active fund managers who are taking advantage of the share price surge of companies like video communication platform Zoom and home delivery giant Domino’s Pizza.

Most of all we are focused on the health and safety of you, our clients and of our dedicated team members. We have transitioned to virtual meetings to save you coming into the city and have well-resourced working from home capability.

We are alert to the psychological harms which can arise from social isolation and while we have seen some of the worst of humanity with fights over toilet paper, we have also been cheered by footage of Italians collaborating in song from their balconies.

We hope you and those closest to you remain safe and well and all of the Affinity team will continue working to safeguard your financial health.