The sharemarket has fallen sharply over the last few weeks due to growing concerns about COVID-19, the disease caused by coronavirus, but Financial Planner and Mortgage Broker Raechel Weaver from SGW Financial Services in Tumut said that while shares may still have more of a downside as uncertainty about the virus grows, all reports SGW are getting say this is “just another correction.”
Last Wednesday she listed some things that all investors in the sharemarket should bear in mind.
“Corrections are normal, selling shares after a fall locks in a loss, share pullbacks provide opportunity to investors to buy them more cheaply, and probably most importantly is for people to avoid getting thrown off their long term strategy,” she said.
She urges investors to remember that “superannuation and retirement is a long term investment,” and that if you are concerned to reach out to your financial planner to discuss everything and get that reassurance from them.
“One of the key messages that we’re sending out, and what’s being communicated to us, is that it’s best to turn down the noise during times like this because there can be a lot that comes out in the media and the news during times like this,” she said.
“While it is a growing issue, it’s still felt that this is just a correction and people should think about their long term strategies.”
Yesterday the Australian share market saw its worst opening day since the global financial crisis due to the collapse in the price of oil, with more than $100 billion wiped off the value of Australian shares.
The Reserve Bank of Australia (RBA) cut official interest rates to a new record low of 0.5 per cent last Tuesday, and has signaled it is prepared to cut further if necessary.
“The global outbreak of the coronavirus is expected to delay progress in Australia towards full employment and the inflation target,” RBA governor Philip Lowe said last Tuesday.
He also said that the COVID-19 outbreak halted hopes of an end to a slowdown in global economic growth that started in 2018.
“The coronavirus outbreak overseas is having a significant effect on the Australian economy at present, particularly in the education and travel sectors,” Mr Lowe said.
“The uncertainty that it is creating is also likely to affect domestic spending. As a result, GDP growth in the March quarter is likely to be noticeably weaker than earlier expected. Given the evolving situation, it is difficult to predict how large and long-lasting the effect will be.”
After the RBA’s announcement on Tuesday, there was an array of announcements from non-major lenders deciding to lower their home loan interest rates. Major banks Westpac, Commonwealth Bank, ANZ and National Australia Bank also moved to cut rates after the announcement.
A list of all the banks and rates can be found online.
At question time last Thursday, Prime Minister Scott Morrison was unable to say whether or not Australia risks a recession as the coronavirus crisis continues to grow.
When asked whether he can guarantee Australia will not suffer a recession, the PM said, “I can guarantee the Australian people that they will get the strong economic management they voted for.”
Australia has not suffered a recession (two consecutive quarters of economic contraction) for almost three decades.
The Treasury estimates that there will be a large cut to economic growth in the March quarter due to both the bushfires in summer and the impact of COVID-19.
Treasury boss Steven Kennedy earlier told the Senate economic committee the virus could slice “at least” 0.5 percentage points from economic growth in Australia in the March quarter, reflecting the impact it has had on tourism, education and the Australian dollar.
This would come on top of the 0.2 percentage point detraction from growth from the bushfires.
“Beyond this preliminary estimate for the March quarter it is too early to tell, given the uncertainties, what the full impact of the COVID-19 coronavirus will be on the economy,” he said.
Shadow Treasurer Jim Chalmers has told reporters that “the Liberals and Nationals are now the custodians of those three decades of unbroken economic growth.”
“Australia is being tested right now by the economic impacts of this coronavirus and the government is being tested as well.”
A multi-billion dollar stimulus package to counter the economic impact of the coronavirus is expected to be released this week.