We are aware that members may be concerned about the impact the coronavirus virus (COVID-19) is having on the Australian and overseas sharemarkets. Here is a summary of what we know as at 1 April 2020.
The impact on sharemarkets
Throughout February and March 2020, Australian and overseas sharemarkets have shown significant volatility in response to COVID-19.
Investors remain concerned about the negative impact COVID-19 will have on economic activity – a global recession appears increasingly likely, though not yet certain.
International supply chains – critical for the production, handling and distribution of raw materials and finished products – remain disrupted.
The tourism, leisure, gaming and education sectors continue to feel the effect of restrictions placed on international movement and travel. Australia’s aviation industry has been hit especially hard and our airlines remain in discussions with the Government about a possible bailout. The Government has stated its commitment to having a competitive aviation sector, without outlining what any additional industry-wide financial support might look like.
Governments continue to respond
Governments and central banks continue to announce stimulus measures to help provide economic support.
The Reserve Bank of Australia (RBA) has cut interest rates to a record low of 0.25%.
In addition to previous stimulus measures designed to support households and businesses, the Australian Government most recently announced the JobKeeper subsidy. Businesses will receive a fortnightly wage subsidy of up to $1,500 per employee in a bid to prevent people from losing their jobs. The Government expects that up to 6 million people will access the $1,500 fortnightly wage subsidy.
JobKeeper is the central plank in a $130 billion economic stimulus package, the third and largest package the Government has announced in response to COVID-19.
In relation to super, the Government announced it will relax early release of super on compassionate grounds, allowing eligible individuals to access up to $10,000 of their super in FY2019-20 and a further $10,000 in FY2020-21. The Government will also temporarily halve the minimum draw-down for account-based pensions and similar products by 50% for FY2019-20 and FY2020-21.
In March 2020, the US Federal Reserve cut interest rates to zero. The White House most recently signed an historic $2.2 trillion emergency relief package into law, and continues to consider the possibility of further relief legislation.
The Bank of England cut interest rates to a joint-record low of 0.1%, while Prime Minister Boris Johnson’s government allocated a total of almost £57 billion in direct support. The support includes an unprecedented promise to pay 80% of the wages (worth up to a maximum of £2,500 per month) of employees at risk of losing their jobs.
In the short term
Sharemarkets remain volatile, with investors uncertain about how long it will take for things to return to normal.
The Australian and US sharemarkets are well off their February highs – the Australian sharemarket down around 27%, and the US sharemarket down around 23%.
During the last week of March however, both sharemarkets rebounded to recover some of their falls – the Australian sharemarket rose around 14% from recent lows, while the US sharemarket rose around 17%. Whether this rebound is a sign of a longer-term turnaround remains unclear.
What this means for your super
It’s normal for sharemarkets to move up and down. The current volatility follows a period of strong returns for sharemarkets, and that’s also normal.
It’s also normal for investor sentiment to turn sharply – investors who are confident about financial markets can quickly become nervous about them. The opposite is also true – recoveries can sometimes happen very quickly.
It’s important to remember that super is – for most people – a long-term investment. Members who still have a few years until retirement have a greater amount of time to ride out the ups and downs of sharemarkets.
However, short term investment returns will be impacted. This is especially true for our investment options that invest in Australian and international shares. This includes our Equity Plus and Balanced (MySuper) investment options.
We will continue to monitor investment markets and work with our asset consultant (JANA Investment Advisers) to finetune our investment strategy and identify any investment opportunities that may arise.
We’re here to help
We understand that volatile financial markets and constant news about the spread of COVID-19 can make people anxious. If you’re concerned about the recent market volatility, you can get general advice and assistance over the phone.
We’re here and ready to help, so phone us on 1800 222 071 between 8am to 8pm (AEST/AEDT) weekdays with any questions you may have.
If you are considering an investment switch, we recommend you seek financial advice before taking action – our Advice service is available on 1800 222 071. It’s important to understand that our Advice team cannot predict future market performance, however, they can talk to you about some important things to consider before switching
Important information: This information is of a general nature only and does not take into account your objectives, financial situation or needs. Before acting on this information, you should consider its appropriateness having regard to your objectives, financial situation and needs. A copy of TWUSUPER’s current Product Disclosure Statement should be obtained from us (by calling 1800 222 071 or visiting twusuper.com.au/pds) and considered carefully before you make a decision in connection with TWUSUPER. TWU Nominees Pty Ltd ABN 67 002 835 412, AFSL 239163, is the trustee of TWUSUPER ABN 77 343 563 307 and the issuer of interests in it. Past performance is not a reliable indicator of future performance and should never be the sole factor considered when selecting a fund.