Core Library

Market Update

Market Context

It has been a turbulent start to the year with Australia beginning the recovery process from the tragic bushfires quickly followed by the threat of a global pandemic.

The effect of the Coronavirus is likely to be proportionately greater than similar events in the past given China’s dominant presence in the new global economy, the speed of the disease spreading, and the measures required to combat it.

When China sneezes, the world gets a cold…..literally.

Concurrently, the stand off between OPEC nations and Russia is adding a second negative to market conditions creating further short-term dislocation.

Lessons of History

If we look at previous incidents of viral outbreaks, such as SARS in 2003 and H1N1 (swine flu) in 2009, short-term corrections were within the range of what is being experienced now. Usually, these corrections were followed by rebounds which is relevant for clients that do not require capital in the short term and can ‘ride out’ the storm.

The magnitude of the current market disruption is significant as evidenced in the dramatic shift of the rolling 12 month returns to 31 JAN 2020 and 29 FEB 2020:


INDEX12 months to1 yr12 months to1 yr
S&P/ASX 200 TR Index AUD29/02/20208.64%31/01/202024.72%
S&P 500 PR Index USD29/02/20206.1%31/01/202019.28%
FTSE 100 PR Index GBP29/02/2020-6.98%31/01/20204.55%
Deutsche Boerse DAX 30 PR Index EUR29/02/20203.25%31/01/202016.19%
Nikkei 225 PR Index JPY29/02/2020-1.13%31/01/202011.71%
Hong Kong Hang Seng PR Index HKD29/02/2020-8.74%31/01/2020-5.83%

Whilst we assume increased volatility in the immediate and short term, with the likelihood of further downside, we encourage clients to also consider the long-term objectives and potential opportunities arising.

Our Current Positions

Of the Core portfolios that hold large exposures to equities; exposure to gold, cash, $US, and international equities held in $US may be undertaken; these positions have lessened the impact of market falls to date.


INDEX20/2/2020 to 9/3/2020
Australia - ASX 200-19.57%
USA - S&P 500-18.56%
UK - FTSE-19.78%
Germany - DAX 30-22.24%
Japan - NIKKEI 225-16.23%
Hong Kong - Hang Seng-9.31%
Core Australian Equities (CMAS)-17.08%
Core Dynamic (CMAS)-14.32%
Core Plus 4 (CMAS)-12.63%

Performance of individual Core portfolios will vary dependent upon specific client exposures

We are yet to liquidate equity positions; however it is likely that we will rebalance equity portfolios in the near term. We are considering allocating cash holdings (in part) to the market dependent upon further short-term movements. Depending upon movements in the immediate term, any additional exposure to equities might be undertaken in three tranches within the relevant Core portfolios.

At this time, we are focussed upon long-term performance whilst monitoring shorter-term fluctuations; we believe that investment income plays a significant role in expected returns and will continue to bias the Australian Equity component of portfolios to a relatively high average dividend yield.

With a long-term view, we are analysing quality companies that have been heavily discounted (of which we currently do not hold in our portfolios) that are presenting at a discount; 2 such examples are CSL & Cochlear.

We do not directly hold oil, aeronautical or travel and tourism companies, e.g. QANTAS & Flight Centre but are reviewing these companies with consideration to potential investment.

Consideration is also made to the longer term with respect to the requirement for access to capital at this time; where capital is not required in the immediate term we do not anticipate the need to sell assets and potentially realise any short term losses.

Of course, if you have investments with us and would like to discuss your options, please call me on 3260 0600.