Market update

We’re aware you may be concerned about the impact COVID-19 is having on the Australian and overseas sharemarkets. Here is a summary of what we know as at 22 June 2020.

Sharemarkets

While volatility remains, sharemarkets continued to consolidate recent gains during the first three weeks of June.

In the US, the Dow Jones Industrial Average (Dow Jones) broke through 25,000 points towards the end of May. These gains were built on in June with the Dow Jones hitting 27,572 points on 8 June 2020. These highs couldn’t be maintained however, and the Dow Jones retraced to 26,024 points as at 22 June 2020.

The Australian sharemarket (as measured by the S&P/ASX200 Index) reached 5,755 points on 29 May 2020 and continued to climb during June, hitting 6,148 points on 10 June 2020. The S&P/ASX200 sat on 5,944 points as at 22 June 2020.

While sharemarkets remain volatile, many of the wildest swings remain on the upside. As at 22 June 2020 the Dow Jones was up 40%, and the S&P/ASX200 up 30%, from their respective pandemic-lows.

The surprising strength of global sharemarkets – since their low points of around 23 March 2020 – has caused them to look expensive by some measures.

Australian economy

At its 2 June 2020 meeting, the Reserve Bank of Australia (RBA) maintained official interest rates at 0.25%.

The RBA reported that while economic activity in Australia had contracted significantly during late March and April, signs of a recovery appeared in May.

Significant job losses have occurred, with total hours worked falling by 9% in April. However, payroll data suggests that the pace of job losses slowed towards the end of April.

The Federal and state governments have committed to higher spending across a range of programs, including the JobKeeper program. These measures are expected to deliver significant support to the economy.

On 19 June 2020 the Australian Bureau of Statistics (ABS) reported that retail turnover rose 16.3% in May (seasonally adjusted) – this was the largest rise ever published, following the largest ever fall of 17.7% in April.

There were large rises for clothing, footwear and cafes, restaurants and takeaway food services. There were also large rises in household goods retailing including furniture, home entertainment, home offices and home improvement.

US economy

At its meeting on 10 June 2020, the US Federal Reserve (the Fed) left the target range for interest rates unchanged at 0-0.25% and indicated that it expects to maintain this target range until it is confident the economy has weathered the COVID-19 storm.

The Fed reinforced its commitment to use its full range of tools to support the US economy. This included a recent expansion of its Main Street Lending Program to allow more small and medium-sized businesses to receive support.

The Fed also announced updates to its Secondary Market Corporate Credit Facility (SMCCF), which will help improve the availability of credit for large employers.

Elsewhere overseas

Major advanced economies recorded significant contractions during the March quarter. However, significant economic support has been deployed with further support being considered.

In China industrial production has recovered, with authorities announcing further stimulus measures at the National People's Congress in May. Exports from China had returned to more typical levels by April, although some of this recovery was likely exporters catching up with orders.

The number of COVID-19 cases continued to increase in several emerging market economies, including India and Brazil. At the beginning of June, Brazil had the second-highest number of confirmed COVID-19 cases after the US. In India, severe restrictions put in place to prevent the spread of COVID-19 saw unemployment increase to 20–25%. Given the limited available support for unemployed workers in India, authorities began to ease restrictions despite the number of new cases increasing.

What this means for your super

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.

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 can make people anxious. If you’re concerned about the recent market volatility, you can get general advice and assistance over the phone by calling 1800 222 071 between 8am to 8pm (AEST/AEDT) weekdays with any questions you may have.

 

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.

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