Navigating the Road to Recovery
After a few crazy months of up, down and sideways markets, I thought it best to give a bit of an update on the current state of markets both domestically and globally.
As we all know, financial markets were heavily impacted by the COVID-19 downturn, with US S&P500 down 34% and Australian All Ordinaries down 39.23% respectively from their February highs at their lowest points in the final week of March.
Thankfully, in the months that have followed these low points in March, these markets have made a relatively considerable resurgence – with the S&P500 now only down 8.2% and All Ordinaries down 16.90% from their February highs. While these are still not ideal, the rebound from the extreme lows has brought some welcome relief to portfolios of all asset allocations.
It is also important to note that the speed at which we approached the February highs was extreme – the US S&P500 grew around 29% in the 2019 Calendar Year, with the All Ords growing 19.15% in that same period, leaving scope for a considerable market ‘correction’, something we have well and truly felt.
As you can imagine, the market beginning to recover is welcomed by investors all over, however as I mentioned in my previous mail-out, I think we still may have more volatility on the short term horizon. During the coming months I still anticipate for markets to chop within a channel before we return to the stable conditions that we have previously seen.
It is for that reason that we remember the importance of good portfolio construction and management, notably, portfolio diversification.
One of the best ways to manage the ambiguity that lays before us is to focus on our portfolio diversification. By having exposure to both growth and defensive assets, it allows us to appropriately hedge our investments across a range of asset classes.
This means that we have protection and exposure in all elements of market movements. This method of structuring portfolios is done with the long-game in mind. While it may not yield as much as some more aggressive portfolios in the shorter term, it also won’t be impacted by volatility as much as some of these more aggressive portfolio’s either.
After all, We should never own enough of any one idea or investment to make a killing in it alone, for the same reason we should never own enough of one investment to get killed by it.
Hopefully the world continues on the track back to normality, but until then – let’s ride the ups and downs trusting our long-term plan!
Unless specifically indicated, the information contained in this email is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek personal advice from a financial adviser.