Good morning to you all and my Best Wishes for a peaceful Easter Break
I will continue to update you weekly as the current circumstances unfold mainly commenting on economic and markets matters.
The business continues to operate normally with most meetings being conducted on line and naturally lots of phone calls and emails.
Everyone’s safety in the community remains the main priority and we are all witnessing the challenge of ‘social distancing’ and extraordinary changes to our way of life which hopefully will be relaxed just as soon as it is safe to do so.
The Government Job Keeper legislation passed through Parliament yesterday which will provide a lifeline of a base income of $1,500 per fortnight to the estimated 6 Million Australians whose livelihoods have been put on hold through no fault of their own. This will cost up to $160 Billion funded by Government Bonds sold at below 1% which eventually will be bought by superannuation funds.
There is also both Federal and State assistance available to support residential and commercial lease arrangements, with most banks agreeing to 6 months deferral of mortgage payments upon request.
At this stage the local share market as a forward-looking indicator appears to have recovered from its lows of mid-March as better information on the effect of the virus on the economy becomes clearer.
For most clients keeping adequate cash reserves and letting the market rebound to fair value is the safest and least risky approach remembering that any share-based investment should have a time horizon of at least 5 years.
Around half of the trading on the ASX has been automated algorithms which has exacerbated the swings often reflecting the US futures market rather than our domestic fundamentals and is something that Regulators will need to reflect on and ensure retail investors have not been disadvantaged.
For those with access to cash there are some reasonable buying opportunities with a number of our blue chip shares looking very cheap and we are quietly buying both the Index and larger companies who have been sold down to help defeat the virus as quickly as possible.
The Australian Financial Review (AFR) reports today that there has been trebling of volume on the ASX again with the Index being traded as a quick proxy to market recovery.
It is likely that dividends from the Banks will be significantly reduced for the next 6 months as loans are amortised and APRA require adequate reserves to be retained in the banks to trade through this. Hopefully this policy can be reversed quickly including share buy-back opportunities at current low prices.
As we look at the overseas situation particularly in Europe the UK and US at this time one can only be grateful that Australia appears to be managing this situation better than most.
We are a resilient community that will bounce back strongly and the business is here to support all clients as we navigate through this period.
All advisers are working normally and if you have any concerns please feel free to ring me directly on my mobile.
Wishing you all a safe and peaceful Easter Break