• With the severe impact of the COVID-19 virus, March was a month that investors would like to forget. Furthering the market drop from February, Australian shares entered a bear market, falling peak to trough a total of 29.4% over March and February before bouncing back up. The impact of the virus has seen an unprecedented level of action taken by both the Reserve Bank of Australia and the Morrison Government. This resulted in the RBA reducing the cash rate twice in the month to record low of 0.25%. Whilst 3 phases of stimulus measures have been announced by the government. The market now appears to have moved from sell everything phase, to an environment where smaller up and downs within the market suggest it is more rational. This saw-tooth pattern is anticipated to continue for a number of weeks
• With the Australian Government significantly ramping up its measures to reduce the spread of COVID-19, the economic data will be awful over the next few months and we are effectively on the path to 10% near-term unemployment. The key uncertainty is how long the country will be in lock down, how long a society can tolerate the lock down, and what long lasting damage will be caused. The next three weeks are seen to be critical. Once through that period, social distancing measures will have started to kick in and we will be able to assess the impact on infection rates. The severity of cases is also important to watch.
• As the US becomes the new epicentre of this virus, infections are expected to keep accelerating with exponential growth, but an increase in testing is a key factor here. We continue to see unprecedented developments on the policy front. The US support package is far larger — and agreement was far swifter — than anything seen in the GFC, with a $2 trillion stimulus package introduced. US markets have rallied again in the last few days as a result, although the S&P 500 remains down 11.71% at the time of writing.
• When considering portfolio investments, it is important to differentiate between companies that will be able to bounce back relatively quickly and those that may continue to be impacted long after other parts of the economy have normalised. International travel restrictions are likely to remain in place longer than domestic social distancing measures, for example, which will have a greater impact on tourism and education industries for Australia. Similarly for dividends it is important to distinguish between companies where the dividend proceeds may just be deferred to the next half, as opposed to ceased altogether.

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