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On this episode of The nestegg Podcast, host Maja Garaca Djurdjevic and three experts discuss the latest in equities, property investing and super.

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Steve Waters, director of Right Property Group, chats about the latest in property, including the much-talked-about use of macro-prudential measures to cool the rapidly expanding market.

RMIT’s senior lecturer of finance, Dr Angel Zhong, talks about soaring ETFs, what they are and why young investors, in particular, are jumping onboard their latest surge. Dr Zhong also takes a closer look at BNPL platforms.

And lastly, tax and super guru Timothy Munro gives his thoughts on Prime Minister Scott Morrison’s choice to backtrack on any further SG changes and looks at the impending end of the low and middle income tax offset.

Have a question for our experts? Get in touch at [email protected] and you might get featured on the next episode.

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How a return to pre-COVID norms is a ‘wake-up call’ for investors

By Cameron Micallef and Sarah Simpkins

December 02 2020
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Invest

How a return to pre-COVID norms is a ‘wake-up call’ for investors

By Cameron Micallef and Sarah Simpkins
December 02 2020

News of a COVID-19 vaccine is a wake-up call for markets, with consumers tipped to return to their previous habits, an industry expert has stated.

How a return to pre-COVID norms is a ‘wake-up call’ for investors

By Cameron Micallef and Sarah Simpkins

December 02 2020
Share

News of a COVID-19 vaccine is a wake-up call for markets, with consumers tipped to return to their previous habits, an industry expert has stated.

Analysts at SG Hiscock & Company suggest the Australian market has shifted from a ‘hope’ to a ‘growth’ phase with a positive outlook for 2021.

Hamish Tadgell, Australian equities portfolio manager, said the huge coordinated policy response from central banks and governments around the world is supporting a more sustainable growth recovery for equity markets.

“Following the fastest despair phase in history, we have experienced one of the strongest hope-based recovery phases we’ve ever seen,” he said.

“On average, it has taken around three years for the market to return to its previous peak earnings level following a downturn. However, the event-driven nature of this crisis, coupled with the paradigm change in fiscal policy support and rise in household savings, makes it very different to the post-GFC recovery. This provides the potential for a much faster return to pre-crisis earning.

Mr Tadgell explained how he is tilting his investment thesis towards companies that will capture the shift from hope to growth and in particular seeking to relocate more towards quality cyclical companies that will benefit from the return to normal.

“This includes energy companies such as Woodside Petroleum and Cooper Energy, and we’ve also increased our weighting towards banks, which are now at our highest level in over 10 years,” he said.

“Nonetheless, there remains uncertainty around how long we will have to live with the virus and the timing of a vaccine, and there is a need to remain vigilant.

“There will no doubt be bumps in the road with the manufacturing and distribution of the vaccine and path of earnings recovery. At this time, more than ever, a disciplined and active investment approach is required,” Mr Tadgell told investors.

But the COVID crisis has its differences from other recessions in history – one being that household income increased through the period, due to JobKeeper and other fiscal support measures.

SG Hiscock AREIT portfolio manager Grant Berry pointed out how Australians have their highest savings rate since the 1970s.

“It raises a few questions. Is the savings rate this elevated because people are fearful and they’re not spending and they’re saving because they’re bunkering down? Is the savings rate because people are essentially locked down in their homes and therefore their ability to spend… is impaired?” he said during an SG Hiscock media briefing.

“Or is the savings rate essentially this high because people just don’t have the need to spend?”

Importantly, consumer confidence is the highest it has been in seven years, the manager commented.

“People are not saving because they’re fearful, not at all. People are saving because they’re not out and about as much, and they’re not needing to spend as much, so they’ve built up this chest of savings,” he said.

The Australian retail sector is expected to benefit from consumers’ improved balance sheets as Christmas approaches, with sentiment rising on the news of a vaccine and Australia enjoying lower case numbers and eased restrictions.

Instead of remaining cautious around going out in public, Mr Berry believes consumers “want to get out”, having been deprived of experiences, with pent-up demand. He referred to a rise in retail foot traffic through the Black Friday sales period.

“The market has been extrapolating the stay-at-home scenario… We’re at the other side of that see-saw. Australia’s position has significantly improved post-lockdown, and now we’ve had the vaccine arrive as well,” he said.

Mr Berry described this change in consumer preference as a wake-up call for the market.

“In Australia, we’ve already gone beyond ‘COVID-normal’, and the market transition triggered by news of an effective vaccine is only just getting started.

“There has been some debate about whether the shift towards working and shopping from home will be permanent, and how this will affect companies – in particular, listed real estate trusts in the office and retail sectors,” Mr Berry said.

“However, looking back to the years immediately following the Spanish flu pandemic, there was huge pent-up demand which resulted in the consumerism and exuberance of the Roaring Twenties,” he concluded.

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About the author

Cameron Micallef and Sarah Simpkins

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron Micallef and Sarah Simpkins

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