The stock market’s FY20 rollercoaster is over – its worst end to a fiscal year since the global financial crisis.
According to the Australian Financial Review, the Australian share market just had its worst performance in a fiscal year since the global financial crisis.
In its Tuesday, June 30 edition, the AFR pointed out the local share market was down 11 per cent year-on-year as at June 30, 2020. It marked the first negative financial year since 2015-16 and the largest fall since 2008-09.
Why are shares going down?
You don’t need Buffett-like wisdom to know why the stock market’s performance has been so volatile in 2020.
Despite hitting a record high in February, the ASX slumped 36.5 per cent when COVID-19 hit Australian shores, impacting over 60 per cent of Australian businesses (as at March 2020) and pushing investors toward safer investments.
Since then, economic recovery has not come close to being fully restored, even though shoppers are returning to stores and stimulus packages are being rolled out across the nation.
Last week, the sirens sounded for more pandemic fears with Victoria’s second round of COVID-19 outbreaks, pushing the S&P/ASX 200 Index down 89.1 points. This didn’t help the share market’s rally to improve before FY19/20 came to a close.
If this isn’t a reflection of the stock market’s volatility, I don’t know what is. And we even called out its volatility back in February of this year – before most even knew what COVID-19 was (Read: Global epidemic shows share market volatility).
Banks and mining companies were the worst ASX performers, mainly due to shareholders selling up and heading for safer investments.
What safer investments?
Investors are scrambling away from a topsy-turvy Australian share market and into safer havens. But which of these are safest while still giving investors a quality return?
Aussie bonds are not a compelling investment right now. 10-year bond rates are under one per cent, recorded at around 0.86 per cent at the end of June.
While they are one of the safest investments you’ll find, bonds are not a good option for yield generation right now.
For that reason, share investors are not currently placing their capital in Australian bonds.
The best term deposit on finder.com.au is 1.50 per cent p.a. for 12 months with Rabobank, a rural and agribusiness bank headquartered out of the Netherlands. The majors fall much further behind.
Again, investors will find safety here. But not return.
This has not been a viable option for share investors looking for both stability and cash flow.
Unsurprisingly, in these uncertain times, investors are shifting toward asset classes underpinned by land value.
Both residential real estate and commercial property investment has been on the rise in recent months. Firstly, as a result of new government stimulus measures.
Secondly – and this is something we are hearing from our latest investors – as a result of the security investors feel investing in a less volatile asset.
There’s no surprise why that is. These investments not only offer security and stability – historically, property performs well during a financial crisis. Property investments can provide returns between 5 per cent and 10 per cent (and sometimes more) if the right property investment is chosen.
With share market volatility at its worst since the GFC, investors are looking to invest on their terms. We’re seeing them turn to property. And we’re hearing they want primary assets in core locations that are tried and tested.
Unlisted property trusts like us are fortunate to be in a position to offer exactly that.
If you’d like to learn more about investing in high quality commercial real estate in Australia, get in touch with us to learn more about our unlisted property trusts.
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