A glimmer of hope amid COVID-19 market uncertainty

COVID-19 continues to disrupt the investment market, creating uncertainty around the world, leaving people with questions about what it means for their super. Leading Market Strategist and investment commentator Yaying Dong says that even amongst the market turbulence, there’s still reasons to feel optimistic and here’s five reasons why…

1.China showing sign of hope

China has been ground zero for the COVID-19 outbreak and the world has been watching to see how they manage the situation and recover from the global pandemic.

As a result of strict government intervention, we are now seeing signs of hope as new infections and deaths dramatically fall and the country’s manufacturing sector slowly recovers. “Looking at the information coming out of China, I think we definitely can be optimistic that COVID-19 can be brought under control,” Dong says. “Governments that enact strong measures are achieving concrete results”.

2. Swift responses from financial institutions

Central banks around the world have cut interest rates – in the United States to near zero and the Reserve Bank of Australia (RBA) to a record low 0.25%. The RBA has also implemented measures to support the economy and help financial markets restabilise.

Dong says these bold moves should provide comfort for investors. “We’re gaining more confidence,” he says. “Central banks have come in fairly aggressively to ensure financial markets continue to function.”

3. Governments aim to soften the blow

The Australian Federal Government’s $320 billion stimulus package aims to help soften the financial impact of the global pandemic on the Australian economy and support those financially affected by COVID-19.

Dong says “The Federal Government was always in a good position to engage in fiscal stimulus given low levels of government debt, this places Australia in a strong position against our international peers.”

4. Volatile, but hopefully not for long

Although, the Australian share market remains volatile, the market has shed more than a quarter of its value since reaching record highs in late February, but experienced its biggest one-day surge in decades on Monday 30 March.

“The economic conditions are going to continue to be volatile, the market is factoring in the real prospect of a recession,” Dong explains. “But this pandemic isn’t going to last forever. Once it’s contained, we are likely to see a very strong rebound.”

5. Diversity is key

It is important to understand that superannuation investment portfolios are diversified, so for most people, not all super assets are invested in the share market.

Your superannuation is intentionally diversified and is invested across a range of asset classes including property, infrastructure, shares, fixed assets, bonds and cash, to help reduce the impact of investment market fluctuations.

Our team of investment experts are monitoring the volatility of the market daily. Investment portfolios in Mercer Super are proactively managed and will be adjusted where appropriate.

Yaying Dong works as a Market Strategist in Mercer’s Delegated Solutions Business across the Pacific Region. Yaying is responsible for providing in-depth analysis and insights on the global economy with a focus towards driving dynamic asset allocation across Mercer’s multi asset portfolios.

16 April 2020