Stuck with one per cent returns on cash balances, investors migrated to equities for their superior yields and hoped-for capital gains. What was forgotten in the mad dash for a better return, was that ‘one per cent is better than minus twenty.’
Forecasting a virus would be the pin that ultimately popped the bubble in asset markets – no one predicted that. March was historic from a markets perspective, as initial panic and liquidation resulted in 30 per cent of the value of the ASX300 wiped out in less than a month. Invariably, different triggers and nuances accompany each crisis and market dislocation, but each is ultimately accompanied by an information vacuum that produces a correction.
In our Investing in Pandemic Markets whitepaper, we discuss the factors that led us to being out of step with the market and to raise cash in our portfolios. So what are the possible opportunities? What’s the path forward from here?
Those focused on quality and value find that opportunities are greatest when that which is temporary is treated as permanent. This crisis will pass like all others before it and navigating through this correction will set up portfolios and wealth outcomes for the next decade.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
