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Australian share market regains lost ground in June 2020 quarter

LDB’s quarterly share market review: second quarter 2020

The Australian share market ended the June 2020 quarter in relatively solid shape, given the economic uncertainty created by the COVID-19 pandemic.

The All Ordinaries index closed more than 17 per cent higher compared to the end of the last quarter, rallying to a high of 6269 on June 10.

The rally follows the massive sell-off in March, when the market fell to a low of 4564, down more than 37 per cent compared to the pre-pandemic peak in February.

While the share market has recovered some ground, the index remains down more than 11 per cent for the calendar year so far and over 10 per cent lower for the financial year.

Share market drivers

Sentiment has improved as the federal government and central bank stepped in with significant stimulus packages to cushion the economic blow from the pandemic and the restrictions that followed.

This was further influenced by similar moves by other governments and central banks, which saw considerable rallies in overseas markets, especially in the US.

Investor confidence also grew due to Australia’s relatively successful containment of the pandemic, as it became more apparent that the healthcare and economic impact would potentially be less than what was first feared.

This cannot be said of some overseas markets, where investors seem to be more focused on the stimulus and less on the underlying crises, or its current trajectory. As such, we are cautious about the sustainability of these markets.

The next stage

Australia has navigated the crisis comparatively well, so the restrictions should continue to ease, and business conditions should progressively improve.

However, we remain cautious on the longer-term impacts that the pandemic will have on the economy, consumer behaviour and corporate profitability.

We believe that further growth will be harder to achieve and investors will need to be more selective in their investment choices.

Navigating uncertain times

When it comes to investing in Australia’s share market, investors are facing more uncertainty than ever.

As we advised in March this year, investors should avoid making any irrational decisions based upon emotional reactions and instead maintain invested in quality assets and stick to their long-term investment strategy.

If your circumstances have changed and you do need to update your portfolio or investment strategy, then it’s important to speak to a wealth management expert first.

An experienced financial advisor will help you optimise your investments to make sure you are getting the most out of them and avoid costly mistakes.

You can speak to one of our trusted tax and wealth management specialists at LDB about your investments by calling (03) 9875 2900 or filling in the contact form below.

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