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3 Minute Economic Summary: March – April 2020

Article By Adam Camac | | Financial Planning
  • With the severe impact of the COVID-19 virus, March was a month that investors would like to forget. However, investor sentiment slightly improved over the start of April as news broke that infection rates were falling which led to the market making a slight recovery.
  • With infection rates falling, some States have begun easing restrictions. Should the numbers continue to be encouraging, this is expected to continue over the next few months albeit at a gradual pace to avoid a second wave of infections. International travel restrictions are expected to remain in place for some time which will continue to impact Australia’s tourism and education sectors.
  • In the US, some States are beginning to reopen as citizens started to protest restrictions despite virus cases hitting a record high. President Trump also suspended funding by the US to the World Health Organisation (WHO) for 60 days as the President made accusations that the WHO did not handle the virus properly. Australian Prime Minister Scott Morrison has also called for an independent inquiry into the cause of the pandemic, which has been rejected by China.
  • The impact of the Coronavirus on listed property has been severe. The normal reliability and safety of rental income was jeopardised as many tenants were affected by the Government imposed shutdowns and/or a lack of customers. Upon social distancing restrictions progressively being lifted this will assist major shopping centre’s (e.g. Westfield’s) as they will to continue to have multiple drawcards for customers, whilst the mid-tier and small-tier centres are likely to struggle again after receiving a boost from social distancing forced residents to use their most local centre.
  • Many investors are anxious about whether or not they will be receiving dividend payments after APRA said they expect the banks to “materially reduce or defer distributions” as a result of the Coronavirus. NAB has already announced that they will be slashing its interim dividend by 64%
  • Oil prices dropped further as global supply began drastically outweighing demand. The price of oil even briefly dropped below zero. Although this is positive for energy prices, the oil industry employs millions worldwide both directly and indirectly who will be negatively impacted.

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