Chief Investment Officer Update

29 May 2020

The rate of COVID-19 infections has been falling around the country and all states and territories are now easing social and economic restrictions.

Craig Turnbull takes a look at the impact on the share markets, LGS investment returns, and the outlook for the Australian economy.

  • Video transcript

    Social and economic restrictions are starting to slow the rate of COVID-19 infections in many parts of the world including Europe, Asia and the US. As a result, many countries are now lifting restrictions.

    In Australia, the number of COVID-19 infections and active cases has continued to fall, and all states and territories are now easing some of the social and economic restrictions.

    We are optimistic that we are past the worst but there is still some uncertainty about what impact the easing of restrictions will have on the community transmission of the virus.

    Global markets have improved since the recent low with the US share market rebounding strongly despite the high rates of infection across the US.

    The S&P 500 is now around 12% below its February peak.

    In contrast, the recovery on the Australian share market share market has been a little more subdued with the ASX 200 still around 19% below its February peak.

    LGS has a diversified portfolio and invests in a wide range of assets including not only Australian and international shares but also property, infrastructure, private equity, fixed interest and absolute return asset classes.

    The aim is to earn long-term sustainable returns and offer some protection for our members’ retirement savings during periods of market volatility.

    Though returns have been negative, LGS investment options have performed better than the share markets during the pandemic.

    Our High Growth investment option has the highest exposure to share markets. After a good rebound in April and May, this option has a -8% return for the calendar year to May 25th, while the ASX 200 over the same period is down 13%.

    The Government assistance to business and workers has helped to boost confidence but there is uncertainty about what will happen when this assistance is wound back later this year.

    Some economists are predicting a quick V-shaped rebound but the economic recovery is more likely to be steady with the some sectors such as tourism, tertiary education and aviation taking much longer to return to normal.

    Interest rates are likely to remain at historic lows for some time and this will help the recovery of the economy and share market.


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