April Market and PortfolioUpdate

New COVID-19 case numbers begin to ease, the RBA sounds a warning for the Australian economy, and oil prices turn negative – we take a look at some popular topics from the last couple weeks.

Have we reached the peak of the COVID-19 pandemic?

In recent weeks, we have begun to see some early signs of progress with regards to a reduction in the number of new daily cases and deaths in various hotspots hit hardest by the Coronavirus pandemic.

Outside of citizens returning from overseas, China is now somewhat back to ‘normal’, with only a small number of new cases being recorded and economic activity picking up. In Europe, countries like Italy and Spain are witnessing vast improvements. Although new daily cases are still in the thousands, there has been a 50% drop compared with a month ago, giving rise to the hope that new cases may have peaked.

Elsewhere, case numbers across the US are starting to ease slightly from their highs. Progress has been prominent in New York, where not only have deaths slowed, but hospitals are starting to see bed capacity emerge after a tortuous period.

We’re also beginning to see a gradual easing of lockdown restrictions across various countries, having already started in some places across Europe and expected to progress further in the coming weeks.

Australia and New Zealand are also weighing up the idea of easing lockdowns, although both stand on the cusp of potentially eradicating the virus and are thus far opting for conservative approaches. Meanwhile, the US is eyeing to slowly reopen the economy, with some states paving the way for business to resume as soon as possible.

In the meantime, although we’re not assured that we are any closer to a vaccine or effective treatment for the virus, there have been some promising developments. This includes news that an antiviral drug, Remdesivir, showed some effectiveness in a limited study. However, the study lacked scientific rigour, so eyes will be fixed to early clinical trial results expected any day now. Other clinical trials for alternative drug treatments are ongoing.

For all the hope that we have reached the peak of the pandemic, it should be noted that the virus is still growing quickly in other locations such as the UK, Turkey, Russia and Brazil, among others. In fact, despite early effectiveness containing the virus, Singapore has seen a new outbreak.

Now is a time where every country will need to be realistic about the situation we find ourselves in. This means that as economies begin to reopen, there is a very real risk of a second or third wave of cases. Caution is the order of the day at this stage, and it may well prove too early to say we have reached the peak of the COVID-19 pandemic.

Warning bells ring for the Australian economy, but is there hope on the other side?

Although a recession is all but assured for Australia, there has been some optimism that we might be able to mitigate the effects of this thanks to a strategy where the economy is being placed in ‘hibernation’.

However, the RBA effectively hosed down such optimism with its latest update. It is now expected that we will see the most significant downturn since the Great Depression, with national GDP set to plummet up to 10% in the first half of 2020. The IMF, meanwhile, expects Australia’s economy to sink 6.7% across the year.

Some observers may have been surprised by upbeat retail sales for March – lifting by a record 8.2% – or the better-than-expected unemployment result, which edged up fractionally higher to 5.2%. However, these numbers don’t begin to paint a true picture of the economy. First, retail sales were inflated by panic buying and hoarding, while secondly, unemployment numbers were based on data before the nation locked down.