Investments: the year in review

COVID-19 spreads throughout investments markets this financial year

The 2019/20 financial year began reasonably well. The first part of the year saw slowing economic growth and continuing low inflation across regions, with accommodative monetary policy from central banks supporting bond and equity markets, which were generally higher. However, the period was also marked by increased volatility, punctuated by back-and-forth US-China trade tensions.

The trade tensions temporarily abated with a preliminary ‘Phase One’ trade resolution between the US and China announced in mid-December. Sharemarkets responded well to this news, continuing their positive run, with emerging markets being the largest beneficiary.

This positive sentiment continued into early 2020. However, from mid-February, attention shifted to the rapid global spread of COVID-19, no longer considered a China-only issue. In response, governments around the world implemented varying degrees of general public lockdowns to contain the outbreak, leading to a sharp contraction in economic activity and record falls in global sharemarkets. As investors favoured perceived safety, government bond yields fell as prices rose, with further support provided by central banks cutting interest rates sharply and restarting or expanding quantitative easing (bond buying) programmes.

However, almost as quickly as they fell, risk markets recovered over the remainder of the financial year, recapturing much of their losses. This was despite the continuing uncertainty of COVID-19 fundamentally impacting numerous businesses, with the positive sentiment supported by substantial and enduring fiscal and monetary support.

In Australia, in line with global monetary policy responses, the Reserve Bank of Australia (RBA) reduced the cash rate twice in March, to end the financial year at a new record low of 0.25%. Fiscally, the Federal Government announced three separate stimulus packages totalling more than $200 billion, which were coupled with further State-driven initiatives.

Economic data weakened, as the unemployment rate reached 7.1% by the end of June 2020, and GDP contracted by 0.3% in the March quarter with the Treasurer declaring Australia to be in a technical recession based on an expected negative June 2020 quarterly GDP result.

 

Impact on super funds

The impact of COVID-19 on economies and investment markets around the world created significant volatility and subdued results for all super funds. As a result, the majority of super funds delivered negative returns for the 2019/20 financial year.

Like other funds, Maritime Super’s investment performance was impacted by COVID-19. Our investment strategy remains focused on the long term to ride out the tough times we face now. If you have any questions about your investments, call 1800 757 607 to speak with a planner.