Tue 11 August 2020

Global Markets Snapshot - Winners & Losers

So what is happening on the Australian & Global share markets right now? What a time!

Let’s look at the initial crash, the recovery, the winners and losers and what this means for those looking to retire in 2020.

The slowdown was coming

While a pandemic was never option number one on economist’s ‘reasons for the next slowdown’ spreadsheets, a slowdown was imminent. The bull run we have been on since the GFC was coming to an end.

The COVID-19 wrecking ball

COVID shattered everything, causing the sharpest market drop in the shortest time period in history. This includes the Tech Wreck of 2000, the Great Depressions in 1929 and the 1987 OPEC Oil Crisis. And far worse than any of the previous SARS outbreaks.

The immaculate recovery

Incredible though it may seem, global markets have mostly recovered from the initial 30% hammering we saw at the beginning of the pandemic.

Since the big drop markets have recovered around 60% of what they lost..

Even though countries are still struggling with COVID, they have already priced in the recovery.

Some animals are more equal than others - winners & losers

As with all things, the recovery has not been a blanket recovery across all sectors, nicely summarised in this table by J.P Morgan.

Winners

Healthcare

With the whole world pushing for a vaccine and the healthcare industry on the front line, healthcare stocks have been a go-to for investors.

Technology

Hardware, software, everyone needs more tech right now. Try and buy a monitor or a printer right this second and see how you go! Working from home has forced a huge bump in home technology needs, as well as massive increase in tech requirements for businesses who were not setup up for remote business operations. 

Ecommerce and online entertainment have also been big winners, as the homebound populace searches for cures to their boredom. Think Netflix, Amazon and meeting apps like Zoom.

Logistics & delivery companies have also been winners for all the obvious reasons.

Industrials

Hardware manufacturing for the winner industries like tech and healthcare have meant a strong uptick in industrial stocks. 

Losers

There are many. Travel, airlines, tourism, events, hospitality, real estate to name a few. Anything you need to leave the house to do, especially if there is a group of people doing it at the same time has been smashed. Super tough time for all these businesses.

Spending has changed

The way people spend their money is different. With no overseas and interstate travel, many will have extra cash burning a hole in their pockets that will need spending. Car sales have increased, caravans sales are through the roof, and I would guess home renovations will also see an increase as homeowners spend travel money on improving their home instead.

Retail not dead, just a flesh wound

At first blush, retail looked to be on the front line as lockdowns and job losses forced store closures and hit consumer spending. However, many retail brands have seen big revenue increases from online sales, so diversification is key in this sector.

How sustainable are the big winner's prices?

The winners (Healthcare, technology and industrials) are trading at a huge multiples of their earnings. In these areas, the P/E earnings, Australian companies are trading at far higher levels than those in America, which are already higher than normal.

Big question is - how sustainable are these stock prices?

My answer - Earnings are going to have to increase substantially to justify these share prices. 

Earnings season is upon us so we will see soon enough progress on that front.. 

Jobkeeper & Jobseeker questions

The Government have now announced extensions to JobKeeper and JobSeeker to follow on, albeit at lower rates, from the current October end date. This extension will allay many concerns and hopefully underpin activity at some level until a more sustainable recovery can take place.

Superannuation through this time

The move as always, is to stay the course. A properly managed portfolio has these kinds of periods priced in. 

Negative periods of growth are always a big red shining light on diversification. You never know what the world is going to bring, and COVID is here to teach us that lesson once again. 

My fellow Paramount Advisor Wayne wrote an excellent post on staying the course during this pandemic, check it out here.


For those looking to retire this year

There is a very good case to go very conservative. Some may be happy with the value of the investments and go conservative and and guarantee their savings now. They’re in the minority from my experience. 


Others need to remain invested and accept some risk and volatility, to increase their capital to provide more for a better retirement.


Thanks for reading and make sure to get in touch for some expert eyes on your finances!


Vaughan CPA SSA
Chief Executive Officer / Client Advisor
Paramount Financial Solutions

Authorised Representative (No 253462) Fortnum Private Wealth Ltd.