Addressing a virtual media briefing on Tuesday, Randal Jenneke, head of Australian equities for global investment manager T. Rowe Price, said that while shares had made a speedy initial rally after the onset of the pandemic in March, much like the virus itself, market recovery would not be linear.
“In March we had the sharpest sell-off we’ve seen in many decades, and then we had the sharpest recovery. But we’re still early on to this event and I think it’s important to understand that while commentators are giving the impression we’re through the worst, I’ve got a different view,” Mr Jenneke said.
“This will unfold over a longer period of time, and we’re starting now to see the second round impacts of the crisis and the economic response as well.”
Mr Jenneke cited Bloomberg data that indicated the ASX 200 was now at the same level performance-wise as it had been five months into the start of the 2008 financial crisis – which subsequently saw Australian shares decline by more than 75 per cent from the peak of the market.
“We’re tracking now like-for-like] where we were for the GFC 20-odd weeks after the event, and while we’re not in the camp to say that we’ll see the sort of decline we saw after the GFC, the key point is we’re not even halfway through this quite yet,” he said.
“There’s a lot that will unfold from a market perspective in [the] coming months and years.”
Mr Jenneke said there were currently a large number of unknowns as a number of developed markets entered a second wave of COVID infections, and the Australian economy faced the possibility of being removed from the ‘life support’ currently provided by the JobKeeper scheme.
“The economy has been sedated through JobKeeper and JobSeeker – we are in an induced coma to a degree, and we’re likely to be in this state until relief measures are taken off,” he said.
“It’s important to think about how the recovery is going to play out, because the greater the support that gets extended, either fiscal or through the banks, will mean we are going to see a slower recovery. This is going to impact what the earnings picture looks like.”
