1920FY in Review

The end of the financial year is always a great time to look back and see how investments, financial markets and economies have performed so we can plan for the year ahead.  With the 2019/2020 financial year now behind us, let us dive straight in…

Not to put too fine a point on it, but the past year has been difficult to say the least!  The US-China trade stoush and Brexit dominated in the first half of 2019/20, causing businesses and consumers to restrain spending.  And, just when we started to see signs of hope, we got hit with the Coronavirus!  There is no doubt, COVID-19 is the biggest threat to the global economy in the last 90 years.

While central banks have slashed interest rates and governments have provided an unprecedented amount of financial support, the lockdown measures have posed a huge challenge to business.  With many countries still battling the first wave of infections, we start the new financial year with countries slowly trying to get back to normal.

The good, the bad & the ugly…

Although the Australian share market fared slightly better over the first half of the year, the ASX200 ended the year down 10.9%, having its worst year since 2011/12.  The US Dow Jones fell by 3%, while the NASDAQ lifted 25.6% on the back of technology businesses.  Despite the Australian drop, it is important to note that only 8 out of 72 trading markets ended the year in positive territory.  Even though returns on Australian shares fell by 7.2% over the year, it is the first drop we have seen in the last eight years.

For now, it’s all about COVID-19…

In the wise words of Thomas Carlyle, ‘he who has health has hope; he who has hope has everything’, and when it comes to the economy, suppressing this virus is critical to its recovery.  The great news in that we are already seeing rays of hope – no pun intended!  This week we saw the biggest one week rise the Australian stock market has seen for four months.  While a vaccine is the silver bullet we are all hoping for, Australia has proven that we can start to rebound the economy in the absence of a vaccine.

Although we can expect setbacks, like the outbreak in Melbourne, re-opening is crucial for business so quick Government responses to these outbreaks will be critical.  While we can expect the Australian economic recovery to be restrained by the migration, tourism, education and real estate sectors taking a hit, it’s tipped the Aussie dollar will trend higher over the year in line with how quickly we managed to flatten the COVID-curve.

Balancing the health risks against the economy will mean the job market will take a hit as long as restrictions remain in place, but the Government has shown a strong drive to protect jobs.  Thankfully, the Governments budget was balanced before the crisis hit, so we can expect cash rates to remain low and economic stimulus packages to continue.

Predictions are for psychics…

All the economists who made predictions for a stellar 2019/2020 trading year, have had to eat their words.  I won’t be silly enough to make predictions for this year!  But as always, the key is to focus on the long game.  While we have already seen meteoric rises in health and technology stocks, and strong gains in supermarket sectors off the back of this crisis, there is some real value out there in quality long term stocks.  So even in strange and unprecedented times, there is always value in buying quality.

If you have any questions or comments, or unsure how the changes might impact you, please get in touch – the team at Apollo is always here to help.

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Federal Budget 2020

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