After a 37% decline in one of the fastest sell-offs ever, Australian (and US) stocks have revived to now sit around 13% above the March 23 closing low. Unprecedented policy stimulus has calmed investor fears somewhat. We have witnessed circa 10% of GDP fiscal stimulus (both in Australia and the US) and “whatever it takes” monetary policy support (rate cuts, unlimited bond buying and various credit support mechanisms).
We continue to believe stocks offer an attractive 12 month plus risk return profile. This profile is superior to cash and most particularly superior to bonds in our view .
Our view is that this is a very significant but ultimately temporary disruption. This is not another great depression (i.e. a severe multi-year slump in activity). We don’t know the exact length, but it will almost certainly be measured in months not years.
Exhibit 1
Source: S&PIQ
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Written by
David Cassidy, Head of Investment Strategy
David is one of Australia’s leading investment strategists.