Investment market performance

21/07/2020

Quarter ended 30 June 2020

The COVID-19 pandemic that has swept across the globe has shocked the economy and will likely result in the deepest global recession in generations. Dealing with the health emergency has required draconian ‘stay at home’ orders in many countries effectively closing key sectors of the global economy. The resulting unemployment surge has been immense but it seems likely further pain is on the way as businesses around the world look to adjust their models in light of the new economic realities.

The sudden halt in economic activity contributed to spiraling declines in shares and corporate fixed interest securities during February and early March as investors dramatically retreated from markets. Perhaps taking lessons from the Global Financial Crisis of more than a decade ago, policy makers around the world have been quick to act with aggressive counter measures. Central banks, including New Zealand’s Reserve Bank, have cut interest rates and implemented liquidity programmes, while governments have introduced massive stimulus measures in an effort to provide support during this unprecedented time.

Investment markets have recovered dramatically since the mid-March lows, with many key share market indices at or above beginning-of-year levels. The COVID-19 pandemic and resulting lockdown has actually proved to be a boon for some companies and this has been reflected in very strong market performance by some shares, particularly some of the bellwethers in the technology, consumer discretionary and health care sectors. Other shares, particularly those in travel and tourism have struggled, with many companies in these sectors facing an existential crisis.  Fixed interest securities have also performed well, as the lowering of interest rates by central banks has flowed through to higher government bond prices.

Of the key investment markets within the various member options, the US and New Zealand share markets have been notable standouts, both of which are hovering at near record highs. Share markets in Europe, while up on the March lows, are still down on the year, in some cases significantly.  The wide variation in returns from both a country, sector and asset class perspective, once again highlight the benefits of adopting globally diversified investment strategies and members can feel comforted by the fact that they do not have ‘all their eggs in one basket.’ 

After a difficult first quarter of 2020, members in the Conservative, Balanced and Growth options will see a significant rebound in performance over the second quarter, from the end of March through to the end of June. There are undoubtedly further significant challenges ahead and members should expect volatility, but the recent recovery does highlight the detrimental impact that knee-jerk reactions can have on long-term investment results. As ever, we recommend that members focus on the long term when thinking about their retirement plans. 

Source: Russell Investments
Date: 21 July 2020
 


The information contained in this publication was prepared by Russell Investment Group Limited. It has been compiled from sources considered to be reliable, but is not guaranteed. This publication provides general information only and should not be relied upon in making an investment decision. Before making an investment decision, you need to consider whether this information is appropriate to your objectives, financial situation and needs. All investments are subject to risks. Past performance is not a reliable indicator of future performance. Copyright © 2020 Russell Investments. All rights reserved. This information contained on this publication is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments.
 

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