Budget 2020/21 – Recovery Mode

What a difference a year makes. Okay, technically it’s been 18 months since the last Federal budget, but let’s not split hairs.  The contrast between Treasurer Josh Frydenberg’s “Back in Black” budget of April 2019 and last night’s “Road to Recovery” version could not have been greater.

Of course the reason the Budget was delayed six months was due to the absolute pandemonium that befell Australia in March this year, just as Treasury would normally have been putting the finishing touches on another budgetary process.

Instead it was all hands on deck, as COVID-19 effectively brought Australia’s economy to a standstill. The Government’s response, which we outlined back in March, was swift and significant, with a range of measures that no doubt averted financial disaster for many.

As this goes to print, over three million Australians remain on JobKeeper, the wage subsidy programme that has allowed many to retain a connection to employment, however tenuous that might currently be. Some one million others aren’t as fortunate, now relying on JobSeeker and the Coronavirus supplement, the key social security measures directed at jobless individuals.

With the JobKeeper rate recently reduced, and its end scheduled for early next year, this Budget’s focus is clearly on getting Australians back into jobs.  

To do that, the jobs will first have to return. This Budget contains a range of measures designed to encourage businesses to hire new employees.  It also contains individual tax cuts that the government hopes will be spent rather than saved.

To find out about which bits of Budget 2020/21 will impact you, read on…

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Clover FY 2020 Investment Year in Review

Image: Shutterstock

Key Take-outs:

  • One of the most volatile six months in share market history came to a close with markets here and overseas recovering much of the dramatic falls of February-March.
  • The turnaround was nothing short of breathtaking, with the Aussie S&P/ASX200 index posting a 16.5% rise between April and June, while the US S&P 500 index rose 20.5%.
  • While not erasing the Feb-March falls in full, the rebound in equity markets has helped diversified portfolios to close out the financial year in reasonable shape.
  • Equity markets continue to be supported by policies implemented by many countries to limit the economic fallout from the COVID-19 pandemic.
  • If there is one investing lesson to take away from the madness of 2020 so far it is this: the less you play with your portfolio, the less likely you are to get played by it.

Another financial year comes to a close. It’s a safe bet, however, that history won’t judge 2019/20 as ‘just another financial year’. It could not have been more atypical. At least not the second half of it, where COVID-19 completely overtook any and all plans for 2020.  

Yet even amid the chaos and confusion of the past six months there remains reason for optimism. For the preservation of hopes and dreams. For a future beyond the current coronavirus-induced malaise.

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Clover Portfolio Update (the COVID-19 edition)

Credit: Photo by Sandro Capatti/Shutterstock: Daily life during the Coronavirus outbreak, Parma, Italy

Key Take-outs:

  • The stellar returns of 2019 were erased in full by one of the fastest (and possibly shortest) bear markets in history, with the bellwether US S&P 500 index falling 35% in the four weeks between late Feb and late March as market panic spread worldwide.
  • After the punishing drawdown, markets, particularly the US, have recovered strongly, with the S&P 500 index gaining 23.6% since its late March lows.
  • The Australian sharemarket has been less responsive, weighed down by the banking and listed property sectors.
  • The S&P/ASX 200 index fell 39% in the same late Feb to late March period, but has only recovered 18.5% to date since the March trough.
  • Despite the falls of the last three months, the longer-term return picture remains remarkably robust.
  • Clover’s positioning to favour overseas versus Australian shares has cushioned our portfolios relative to more traditional asset allocations.

To say it’s been one hell of a ride these past few weeks is an understatement.  You don’t see market volatility like this very often, and for many it probably felt like being caught in the open by a Category 5 cyclone with nowhere to hide.

Amidst the mayhem of February and March there have, however, been some important lessons, provided you’re prepared to learn from the experience. To do so, read on.

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COVID-19: New Public Health Measures and Financial Rescue Package

It’s nearing midnight as I write this, having just wrapped my head around the latest measures announced from tonight’s National Cabinet meeting of the Prime Minister and Premiers/Chief Ministers of the States and Territories.

That was after spending much of the afternoon combing through press releases and bulletins detailing the additional $66 billion economic rescue package announced by Prime Minister Scott Morrison and Treasurer Josh Frydenberg earlier today, adding to the $17.6 billion stimulus package announced on 12 March.

Events are unfolding so rapidly that the measures just announced may be superseded in short order, but as at the time of writing (11.31pm Sunday 22 March 2020 AEDT), these are the things that you should be aware of in order to play your part in helping see Australia through this COVID-19 crisis.

I’ll tackle the public health measures first and then loop back to provide some detail on the economic rescue package and things to keep in mind should you be impacted by the economic effects that will result from the required public health response.

As the situation will remain fluid for the foreseeable future, please also check in with the Commonwealth Department of Health’s COVID-19 page on a regular basis for the latest information and guidance.

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Market Plunges – an Investing Rite of Passage

5 investing biases

You never forget your first share market plunge.

It was August 1997 and there I was, a mere few months in my new role as a Para-Planner (the term for a Financial Planner in training) with the private client arm of one of the world’s largest accounting firms.

As is typical of many twenty-something year olds with a finance degree, I rated my ability as an up-and-coming share market wiz highly. I had already built up a small portfolio of direct shareholdings in what could best be described as ‘speculative’ positions, with plans to add newbie miners, biotechnology startups and the fledgling “World Wide Web” enabled tech sector.

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Coronavirus v Superhuman. Who Wins?

Here we go again. The financial headlines are once again screaming financial market annihilation and impending collapse. “ASX slammed” shouts one, while another tells of a “Wall Street crumble” and, in relation to the Dow Jones, “the biggest point drop in history”.

Everywhere you look, the financial news is currently filled with stories of share markets crashing and of investors fleeing, presumably for the safety of cash. To a novice investor these shrill warnings can’t help but create anxiety, however long-standing Clover investors will know that we’ll hear these same siren songs from time to time, without the imminent financial meltdown eventuating.

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Frankly, the Election was a Boomer Victory over their own Kids

By the time I headed off to bed last Saturday the federal election was effectively over, with Labor leader Bill Shorten conceded that it was unlikely that Labor would win the seats required to form government.

The election result came as a surprise to many political pundits, given that most polls had predicted a comfortable Labor win in the run-up to the election.

As I write this, the Liberal/National coalition has secured 78 seats, ensuring a majority for the new Morrison government in the upcoming 46th Parliament of Australia.

Waking up to a cold Sunday morning with the previous day’s election result rattling around in my head I decided that a ride to the hills was in order. Donning copious layers of cycling gear to ward off the chill, I pointed my trusty bike in the direction of Eltham and off I rode.

Leaving early, my route took me through a still sleepy Brunswick, the inner-city suburb just north of Melbourne, out through Heidelberg and finally to Eltham, nestled at the foothills of the Shire of Nillumbik in Melbourne’s outer east.

Elated in Eltham, Bummed in Brunswick

Eltham sits in the electorate of Menzies, and the incumbent Liberal candidate, Kevin Andrews, comfortably retained his seat with a Two Candidate Preferred (TCP) vote of 57%.  Having a well-earned brekky at the Eltham shopping strip it was hard not to notice two distinct themes.

Firstly, I was surrounded by people in their mid-fifties and beyond, a demographic oft-labelled “Baby Boomers”. Secondly, these Boomers were (from their demeanour and the bits of conversation I caught), thrilled that the Coalition government had been returned for another term in office. It was fair to say that the mood in Eltham that Sunday morning was positively “chipper”.   

The ride home took me through the heart of Gen Y-centric Brunswick, in the electorate of Wills, where Labor’s Peter Khalil held off a stern challenge from The Greens. There the cafés lining ultra-hip Lygon Street told a very different story.

The mood in Brunswick was distinctly more sombre, with none of the energy pulsating around Eltham. Poker-faced twenty and thirty-something Millennials sat huddled in cafes in quiet contemplation.

In the few short hours I spent riding that day I saw the two sides of the election outcome; the winners and the also-rans. And as a Gen X, wedged between the Boomers and their Gen Y kids, I find myself asking one question: what exactly happened on Saturday 18th May and what does it mean for the various generations?

Read on to find out…

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Budget 2019/20 – Same Old, Shame Old

Treasurer Josh Frydenberg stood up in Parliament yesterday evening to deliver his maiden Budget speech as Treasurer, having inherited the job some seven months ago amidst the Liberal party in-fighting and change of leadership.

There’s a lot riding on this Budget, and it shows. In essence this Budget has one job, and one job only; to put the Coalition government in a position where it has the best chance of retaining government at the yet-to-be-called general election.

Political pundits now put the most likely date of the next election at 11 May, a mere five or so weeks away. We’ll know soon enough, as it’s expected that Prime Minister Morrison will take that drive up to Yarralumla any day now.

But back to the Budget. The Good, the Not-so-Good and the Questionable. What exactly does it contain (other than the phrase “without increasing taxes”, uttered by Treasurer Frydenberg no less than nine times during his speech)?

More importantly, how will it affect you, your nearest and dearest and your prospects for a brighter future? Read on to find out…

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Why volatile markets separate true investors from the rest

Male looking stressed out in front of his laptop computer

There’s a saying among seasoned pilots that flying can best be described as long stretches of boredom punctuated by moments of sheer terror.

Many investors, reeling from the recent pullback in the US sharemarket that commenced on 5 February after the stellar returns of 2017,  would no doubt share these sentiments.

For newer investors who’ve never experienced a share market pullback of this size and speed, the recent movements must have been nerve-wrecking. Media headlines screaming “market rout”, “bloodbath” and “worst point decline in history” certainly didn’t help matters either, stoking fear in the investing public for the sake of clicks, views and readership.   

If you’ve just had your first experience of a sharemarket dip, welcome to the club. Grab a seat and catch your breath. It may be your first market correction but it will almost certainly not to be your last. All-time sharemarket highs followed by the occasional reversal are a feature, not a bug, of long-term investing.

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