The Coronavirus pandemic and the economy – a Q&A from an investment perspective

The attached note takes a look various questions in relation to the impact of the Coronavirus on the economy and the response to it, including: why does a big part of the economy have to go into ‘hibernation’? How long might it be for? How big will the hit to the economy be? What does it mean for unemployment? Why is it so important for governments and central banks to protect businesses and workers? Can we afford all this stimulus?

The key points are as follows:

  • Significant government support is essential to enable parts of the economy to successfully hibernate.
  • This will be financed by borrowing and is affordable given Australia’s relatively low public debt and low borrowing rates.
  • Central bank support to keep financial markets functioning properly is also essential and quantitative easing is part of this.
  • We are more likely to see a U-shaped recovery than a V or L.

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New laws to protect your retirement savings

The federal government has introduced super laws to help prevent super balances from being eroded by fees, insurance costs for cover that people may not want or need. For more information, please click here.

Successful investing despite 115 million worries and Truth Decay – how to turn down the noise

Key points:

  • A surge in financial information and opinion combined with our inclination to focus on negative news risks making us worse investors; more fearful, more jittery, more reactive, less reflective and more short term. This is potentially harmful to our long-term financial health.
  • Five ways to turn down the noise and stay focused as an investor are; put the latest worries in context, recognise shares return more than cash in the long term because they can lose money in the short term, find a process to help filter noise, don’t check your investments so much, look for opportunities that worries throw up.

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