Coronavirus Implications – Investment Update
Late 2019
2019 was a bumper year for share markets, and December was no exception. Progress towards achieving a Phase One trade deal between the US and China fuelled the rise, supported by indications that global interest rates would remain largely ‘on hold’ during 2020. Political risk eased in the UK as the Conservative Party led by Boris Johnson achieved one of its largest majorities in modern times to win the UK General Election. Protests in Hong Kong remained a potential flashpoint.
The New Zealand (+1.6%) and Australian (-2.2%) share markets experienced contrasting returns in December. New Zealand shares rode the gains of international markets and embraced easing local risks, pushing annual returns above 30%. Australian shares capped off a strong year with a negative month, not helped by the Australian bushfires.
Early 2020
January proved to be an eventful month. After a strong start with the signing of the Phase One trade deal between the US and China, things worsened as the coronavirus epidemic emerged and triggered a sell-off in global share markets in the final week of the month. As the scale of the outbreak from Wuhan, China, intensified, fears over the potential economic fallout did little to ease concerns.
New Zealand (+2.0%) and Australian (+5.0%) share markets pushed higher over January. Both markets benefitted from weakening local currencies, which increased the value of offshore earnings. New Zealand and Australian markets both lost some value in the final week of January as the threat of slowing exports to China materialised.
Implications of the coronavirus on financial markets
Global markets tumbled in the last week of February, dragging down the S&P500 (main US equity market), reflecting rising fears over the coronavirus that is spreading quickly around the world.
What does this mean for you, and should you be concerned?
The recent spread of the virus (now officially a pandemic) will only add to the uncertainty and significantly widen the range of possible outcomes for global economic growth. However, if the downward trend of new cases in China continues, Chinese authorities may loosen restrictions on business in those provinces deemed less at risk of spread, enabling economic activity to resume.
It’s important to understand your investments and the level of risk involved. The volatile nature of markets continues to be a reminder of the benefits of diversification and of maintaining a focus on the longer term. News reports on changes in market performance can prompt concerned investors to check savings balances and change their investment strategy without considering long term trends.
Here are some ways you can understand the best pathway for your situation
1) Do you know what investment option(s) your money is invested in? The NZAS Retirement Fund offers four investment options. Three options – Conservative, Balanced and Growth – are diversified funds. This means they are invested in a number of different assets such as shares, property, bonds and cash. The other option – Cash – is a single sector option and (as its name suggests) it comprises only cash. Make sure you know what investment option you are in (or, if you have split your investments between two or more options, the percentage splits between them) and the impact that investment market fluctuations may have on the returns.
2) Have you spoken to an expert? An authorised financial adviser can provide you with independent guidance and advice on superannuation and other financial services and products. If you are concerned about the markets, or are considering changing investment options, investing more money or making a withdrawal sometime soon, then speaking to an authorised financial adviser can help refine your goals.
3) Need to withdraw money in the near future? If you are looking to buy your first home or are thinking of withdrawing your money for retirement, it’s important that you understand that the value of your investments may go up or down with the market, and that you allow for that.
While we do not know what the future holds, it seems unlikely that investment returns in the coming years will be as strong as they were in 2019. Investing for retirement is a long-term journey, so we encourage members to keep sight of the end goal rather than get too focused on short-term results, pleasing as they have been until recent times.
Read more
Downloadable the full Mercer 2020 outlook report
Monthly financial market commentary is available online
2019 was a bumper year for share markets, and December was no exception. Progress towards achieving a Phase One trade deal between the US and China fuelled the rise, supported by indications that global interest rates would remain largely ‘on hold’ during 2020. Political risk eased in the UK as the Conservative Party led by Boris Johnson achieved one of its largest majorities in modern times to win the UK General Election. Protests in Hong Kong remained a potential flashpoint.
The New Zealand (+1.6%) and Australian (-2.2%) share markets experienced contrasting returns in December. New Zealand shares rode the gains of international markets and embraced easing local risks, pushing annual returns above 30%. Australian shares capped off a strong year with a negative month, not helped by the Australian bushfires.
Early 2020
January proved to be an eventful month. After a strong start with the signing of the Phase One trade deal between the US and China, things worsened as the coronavirus epidemic emerged and triggered a sell-off in global share markets in the final week of the month. As the scale of the outbreak from Wuhan, China, intensified, fears over the potential economic fallout did little to ease concerns.
New Zealand (+2.0%) and Australian (+5.0%) share markets pushed higher over January. Both markets benefitted from weakening local currencies, which increased the value of offshore earnings. New Zealand and Australian markets both lost some value in the final week of January as the threat of slowing exports to China materialised.
Implications of the coronavirus on financial markets
Global markets tumbled in the last week of February, dragging down the S&P500 (main US equity market), reflecting rising fears over the coronavirus that is spreading quickly around the world.
What does this mean for you, and should you be concerned?
The recent spread of the virus (now officially a pandemic) will only add to the uncertainty and significantly widen the range of possible outcomes for global economic growth. However, if the downward trend of new cases in China continues, Chinese authorities may loosen restrictions on business in those provinces deemed less at risk of spread, enabling economic activity to resume.
It’s important to understand your investments and the level of risk involved. The volatile nature of markets continues to be a reminder of the benefits of diversification and of maintaining a focus on the longer term. News reports on changes in market performance can prompt concerned investors to check savings balances and change their investment strategy without considering long term trends.
Here are some ways you can understand the best pathway for your situation
1) Do you know what investment option(s) your money is invested in? The NZAS Retirement Fund offers four investment options. Three options – Conservative, Balanced and Growth – are diversified funds. This means they are invested in a number of different assets such as shares, property, bonds and cash. The other option – Cash – is a single sector option and (as its name suggests) it comprises only cash. Make sure you know what investment option you are in (or, if you have split your investments between two or more options, the percentage splits between them) and the impact that investment market fluctuations may have on the returns.
2) Have you spoken to an expert? An authorised financial adviser can provide you with independent guidance and advice on superannuation and other financial services and products. If you are concerned about the markets, or are considering changing investment options, investing more money or making a withdrawal sometime soon, then speaking to an authorised financial adviser can help refine your goals.
3) Need to withdraw money in the near future? If you are looking to buy your first home or are thinking of withdrawing your money for retirement, it’s important that you understand that the value of your investments may go up or down with the market, and that you allow for that.
While we do not know what the future holds, it seems unlikely that investment returns in the coming years will be as strong as they were in 2019. Investing for retirement is a long-term journey, so we encourage members to keep sight of the end goal rather than get too focused on short-term results, pleasing as they have been until recent times.
Read more
Downloadable the full Mercer 2020 outlook report
Monthly financial market commentary is available online
This information has been prepared by Mercer (N.Z.) Limited for general information only. The information does not take into account your personal objectives, financial situation or needs.This information has been prepared by Mercer (N.Z.) Limited for general information only. The information does not take into account your personal objectives, financial situation or needs.
9 March 2020