Returning the focus to the longer-term

Articles 24/05/2020
Returning the focus to the longer-term

As the health challenges posed by COVID-19 continue to subside, the Australian economy should begin to enjoy the fruits of re-opening earlier than many of our global counterparts. While these developments have made for positive headlines and provided support to markets, we remain cautious as we expect to see the real economic impact become clear in the weeks and months to come.

Over the last few weeks, we've seen a number of welcome announcements from Australian governments including:

a) Lifting the number of people allowed in social gatherings;

b) The resumption of elective surgeries; and

c) The re-opening of pubs, cafes and restaurants, albeit with varied capacity limits.

Thankfully, with governments' stringent approaches to testing, contact tracing (including the use of the COVID Safe app) and regional containment strategies, we feel the risks associated with a material 'second wave' event have been somewhat reduced.

While each incremental relaxation announcement is positive, we need to remember much of the economy will not immediately return to 'business as usual'. Measures (including a number of travel restrictions) will likely remain in place until effective treatments become available. Combined with the likely hesitancy of the broader population to immediately return to their pre-COVID work and travel practices and social activities, we suspect the economic recovery may be take longer than some expect.

Despite our degree of caution and a view that markets in general are not overly cheap, we remain on the look-out for attractive long-term investment opportunities to transition our growth allocations towards our long-term targets. Importantly, the decisions we make today look through the short-term noise and disruption, with a view to the medium to longer-term. We expect to uncover more opportunities in select industries that should come out of the current environment stronger than ever.

With short-term volatility likely to continue over the coming months, it is almost certain that we will not pick the bottom in these investments. However, we expect to look back in the years to come considering these attractive entry prices.

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