Investment insights on the path ahead to a market recovery

While it seems financial markets have survived the first waves of volatility, what could happen next – and what might that look like?

The Coronavirus impacted businesses, households and individuals worldwide, resulting in the shutdown of much of the world’s economy. In response to the rapid slowdown in economic activity, investments experienced volatility on an unprecedented scale. But to help stabilise conditions, world governments and central banks deployed billions of dollars’ worth of financial support and monetary policy stimulus – leading to a slow recovery in financial markets. So, what could happen next? As we approach the half-year mark, our Investments team reveals where investment opportunities could exist and shares insights into the possible path to recovery for financial markets in the future.

Fixed Interest

The safer the investment, the lower the potential returns – so when it comes to investing in the current low interest rate environment, investors may need to consider their need for safety with their desire for higher returns. This applies to traditionally conservative fixed interest investments such as government bonds (lower risk for lower return) and corporate bonds (higher risk for higher return). Looking ahead, safer government bonds will likely remain flat over the near term. But there may be investment opportunities available at the higher end of the risk spectrum – particularly corporate bonds, which are riskier and have the potential to default on their payments to investors.


Within the alternatives asset class – which comprises a range of “alternative” investments that don’t conform with traditional investments, such as commodities (like oil and agriculture) or currency – there are risks but also investment opportunities. A particular area of focus for managers of alternatives funds will be identifying new risk management tools and risk mitigation strategies for portfolios. That’s because traditional hedging strategies (which involve strategically including defensive assets to help offset or lower risk) weren’t particularly effective last quarter. For example, there may be some discussion about gold as a better hedge in portfolios compared to the US Dollar given the high level of debt the United States currently holds – reportedly in the trillions of dollars.

Property and Infrastructure

As lockdowns gradually loosen and as people transition back into society, we are seeing signs of a recovery across transportation infrastructure stocks hit hardest by social-distancing and lockdowns – i.e. toll roads and airports. However, some people may continue staying indoors and working from home. So over the coming months, this could mean a persistent demand for utilities servicing residential premises and telecommunications towers – sectors that retained their strength when the broader market was volatile. After the pandemic impacted how people travel and gather, the values of some of these investments were discounted. This means that in the current low interest rate environment, there may be opportunities to access infrastructure investments at a lower price.

In coming months, we could see continuing challenges for property – particularly the retail sector which, prior to the Coronavirus, already struggled with the shift away from physical shopping centres and toward online retailers. This trend, accelerated by the pandemic, could benefit industrial property for warehousing. The good thing is that property is an adaptive and convertible asset class that comes in all shapes and sizes, meaning we could see unused retail space converted into office or residential buildings in future, particularly for property hotspots in CBDs, though this may be offset by an oversupply of office space as a result of changing working habits.

Australian Shares

Progress is unlikely to be linear in future, and it’s possible that there will be a sharper recovery in some market segments compared to others. For example, parts of the Consumer Discretionary sector have begun showing strength, particularly domestic air travel and tourism stocks like Webjet or Flight Centre as Australians are slowly able to travel again – even if only nationally. Casinos could also rebound when lockdowns are loosened. So far, the likes of Crown and the Star have significantly cut operating costs and are preserving their cash while readying themselves to reopen. Across other areas, iron ore has remained resilient as Chinese demand has remained strong, but this has the potential to change given the escalation in trade tensions between China and Australia. And banks could continue to face challenges as reflected in the higher provisions they’ve made for Coronavirus-related losses – with some banks reducing or deferring their dividend payments.

Global Shares

Given the uncertainty surrounding the world economy, financial markets appear to favour sectors and industries that can continue operating in this non-standard environment. For example, strength has been observed across the Information Technology sector and for companies that have been able to continue operating regardless of the circumstances. This was also noted for the Healthcare sector as companies raced against the clock (and each other) to improve testing solutions or to develop a vaccine. Compared to developed nations, emerging markets may face more challenges due to the less developed state of their infrastructure and health facilities. Their recovery could depend on how well they are able to manage the pandemic from an economic perspective, with governments needing to provide large financial stimulus support to fill the void of lost economic activity.

Outlook for the road ahead

The pandemic has highlighted the interconnected relationship between world economies and financial markets – each of which were impacted in unique ways. As a result, some investments haven’t performed the way they normally would, suggesting that a recovery for some asset classes may differ from previous experiences – for example, following the Global Financial Crisis.

But while there are still many unknowns, what we do know is that the path to recovery in markets will depend largely on how quickly world governments can curb the spread of the virus to reopen their economies and restart activity. At this time, governments continue working towards carefully balancing the health of their economies with the health of their citizens. So, considering the above developments, our consensus for a global recovery is a slow one that extends well into 2021.

Want to learn more?

As conditions continue to unfold, The Colonial First State Investments team continues to communicate closely with investment managers to identify the risks and opportunities in markets and help members achieve their individual retirement goals. Before making any changes to their investments, it can be important for members to consider their risk appetite, wealth objectives and seek appropriate financial advice.

Contact Dev Sarker today at 1300 717 136!

Economic and market update video – 15 June 2020

Economic and market update video – 15 June 2020

Bob Cunneen, Senior Economist at MLC Asset Management, discusses the continuation of the May share markets rally in Australia and overseas in anticipation of a reopening of economies, despite COVID-19 infections accelerating in Latin America.

Watch the 4 minutes video here.



How to manage debt during COVID-19

It’s easy to think you’ll never get ahead when you have mounting bills to pay, on a reduced or lost income and limited savings, all because of a pandemic that no one saw coming.

But, it can be done.

Take confidence in knowing that with determination, understanding the support options available to you and having a realistic plan, debt and bills can be managed.

In this article, we’ll address six steps that could help to get you back on track with managing your debt during COVID-19.

1.    Understand how much you owe

The first step is to add up all of your debt, to get a clear picture of what you owe.

While laying all your cards out on the table can be extremely confronting, especially if you’ve never done it before, it’s a critical step to see the bigger picture of your financial situation.

2.    Keep track of your expenses and income

The next step is to work out how much you can afford to pay to cover your debts.

Having a clear picture about what you earn versus what you spend, can highlight areas where you may be able to pull back spending. Whatever income you’re able to save can then be allocated towards your debt. There are budget planners and phone apps you can use to track your spending. Alternatively, you can simply download your bank statements and keep a record of your receipts. Make sure to include everything from your necessities like rent or mortgage, utilities and transport to what you spend on non-essentials like entertainment.

3.    Investigate the support options available to you

Depending on your situation, there are a number of ways you can get financial assistance to deal with the impact of COVID-19.

Financial and banking institutions

Some banks are now allowing customers to defer their mortgage repayments temporarily, in addition to refunding late fees and interest for credit card payments.

It’s important to remember that while this option might help with your short-term cash flow, interest will continue to be charged to your outstanding loan amount – meaning more interest could be payable over the term of the loan. It’s also worth checking with your bank to ensure these offers apply to you.

Government response packages

The Federal Government is supporting individuals and families affected by COVID-19 through a range of measures, including:

Read MLC articles for more detail about these measures and if they apply to you.

4.    Develop a plan to manage debt

Now that you’ve identified how much you owe and the financial assistance available to you, the next step is to develop a plan.

Having a debt management plan in place that’s realistic to follow, can help you manage your debt to achieve your goals. But remember to keep a long-term view. You want to ensure that this isn’t a just a temporary fix, otherwise the problems could kick up again.

Set priorities

If you have more than one outstanding debt, consider working out how much you can repay on each, based on the minimum repayment owing.

Alternatively, if you’re able to repay more than the minimum, look at prioritising your debts. You’ll need to think about things such as the type of debt you have -for example, an investment loan, or personal debt – and how much is owing.

For example, if you only have personal debt, you may choose to prioritise repaying debts with the highest interest rate first, given these will be costing you the most to keep them around longer.

At the end of the day, the approach you take is a personal one but it’s important to have a plan and stick to it. And that could mean making other changes.

5.    Set aside a savings fund for emergencies

Whilst you can never prepare for events like COVID-19, there are things you can do to ensure when these types of situations arise, you’re able to get through them.

One approach may be to set up a savings fund for emergencies, where you transfer a small amount of your income to a high interest savings account on a weekly, fortnightly, or monthly basis. This will then provide a financial safety net which you can draw on when you really need it.

6.    Seek professional support

Managing debt is not something that comes easily to most people, so sometimes speaking to a professional can help put your mind at ease.

A financial adviser will assess your situation and provide you with a manageable repayment plan, which may see you pay your debt off faster.

Bottom line: the most important thing to remember is that you can get ahead with managing your debt during COVID-19, but it will require some changes and reprioritisation. Use the various resources and support available to you and stick to a plan. You can do it!

We’re here to help, contact Dev Sarker at 1300 717 136 today.

Article source:

HomeBuilder program announced

The Government has announced the HomeBuilder program to help drive economic activity across the residential construction sector by providing grants of $25,000 to eligible owner-occupiers for new home construction and substantial renovations.

Read the full details here – homebuilder_program 4 June 2020

Want more information?

Please speak with a financial advisor at Bluerocke Investment Advisors or call us on 1300 717 136.


Extended lodgement time frame – Notice of Intent to claim a deduction in 2018/19

Extended lodgement time frame – Notice of Intent to claim a deduction in 2018/19

The ATO has written to an estimated 25,000 individuals who:

  • have claimed a tax deduction for a personal super contribution in the 2018/19 financial year, and
  • whose super fund has not reported receipt of a valid Notice of Intent.

The ATO letter encourages these individuals to submit a Notice of Intent to their fund to receive an acknowledgement notice before 30 June 2020, to retain the deduction.

What about the legislated timing requirements?

Under tax law, a Notice of Intent must be submitted to the fund and acknowledgement received by the individual by the earlier of:

  • the end of the following financial year (30 June 2020 for the 2018/19 financial year), or
  • the time the person submits their tax return for the financial year in which the contribution was made.

This would ordinarily mean that if a person has already submitted their tax return without lodging a Notice, they are ineligible to claim a deduction.

However, the ATO has confirmed that in this instance, if a Notice of Intent is submitted with an acknowledgement received from the fund before 30 June 2020, they will not review the timing of the acknowledgement notice.

Those clients contacted by the ATO should endeavour to lodge outstanding Notice of Intents as soon as possible to allow trustees to provide acknowledgement prior to 30 June 2020.

Any questions, contact a financial adviser at 1300 717 136 today.


Source: MLC News and Updates, Article published on 05-06-2020

Contribution flexibility for older Australians – Regulations made

On 29 May 2020, the Government made regulations which increase the age at which contributions can be made:

  • without meeting the work test, and
  • on behalf of a spouse.

The measures are effective from 1 July 2020.

It is important to note that legislation will need to be passed by Parliament for the proposed changes to the eligibility age for the bring-forward rule for this to become law. This Bill proposes to allow individuals under aged 67 on the prior 1 July to trigger the bring-forward rule. Currently, this is only available to those aged under 65. It is proposed to commence from 1 July 2020.

Work Test

The work test will no longer need to be met to make voluntary contributions to superannuation from 1 July 2020 for those aged 65 and 66. This means the work test requirements will align with Age Pension age which will be 67 from 1 July 2023.

The removal of the work test provides the opportunity for eligible clients to:

  • make non-concessional contributions
  • make concessional contributions including catch-up contributions
  • implement the recontribution strategy
  • manage tax, including capital gains tax
  • claim the spouse contribution tax offset or co-contributions (if eligible)
  • make contributions under the small business CGT concessions, and
  • transfer foreign superannuation into an Australian superannuation account.

Spouse contributions

The age limit for spouse contributions will increase to 74. Currently, spouse contributions can only be made if the receiving spouse is under age 70. Additional flexibility will be provided by the removal of the work test for those aged 65 and 66.

This would enable spouse contributions to be made for the receiving spouse without the need to satisfy the work test up to age 67. From age 67 to 74, the work test would need to be satisfied by the receiving spouse.

Making spouse contributions is a simple strategy that enables that spouse’s superannuation to be boosted. This may be used as a means of equalising the superannuation interests of both members of the couple. It may also entitle the contributing spouse access to the spouse contribution tax offset.

There is no change to other criteria, such as the total superannuation balance, which will limit the ability to make non-concessional contributions.

Need advice? 

Speak to financial adviser, Dev Sarker at 1300 717 136 today.


Source: MLC News and Updates, article published on: 01-06-2020