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Market jitters remain as virus spreads globally


24 March 2020

House view






As the world grapples to contain the spread of COVID-19, our chief investment office examines the potential impact on global markets

The past few weeks have been one of the most volatile periods for global markets and investors.

As governments and central banks roll out coordinated efforts to stem the economic impact of the coronavirus, most asset classes went through significant swings from rallies to losses.

Commodity prices saw sharp declines including those in oil and gold. Global stock markets saw some of the most emphatic moves, pushing US stocks into bear market territory. In turn, this has pushed the Volatility Index (VIX) to levels not seen since the 2011 U.S. Debt Crisis.

In the near term, we believe markets will continue to be on edge as investors grapple with contradictory signals. Despite government aid packages and travel bans being imposed by different countries, the spread of the virus (outside of China) remains a concern.

Overall, our chief investment office expects the slowdown in global growth will be more pronounced than first anticipated. But we continue to believe that the virus will only temporarily affect markets.

However, this cautiously optimistic scenario is conditional on the dip in growth and company profits, and not leading to lasting liquidity and solvency problems.

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Investment outlook – in brief

We maintain our benchmark exposure to growth assets. In our view, Emerging Markets, in particular China, have the ability and willingness to stimulate the economy. We remain underweight Australian equities.

We are moving international fixed income from overweight to benchmark after a strong move down in bond yields in favour of cash. We retain our benchmark position in Australian fixed income.

ANZ investment strategy positions – March

Investment position
Asset class Reasoning
Growth assets Recent record falls in equity markets have seen our benchmark growth position move to a mild underweight. In due time, this will return to benchmark. While the coronavirus containment issue and its long-term impact remain to be seen, we retain a constructive outlook for equity markets.
Developed equities Short-term risks to the downside persist within developed market equities. Market movements have taken us below our underweight developed global equities target. We have begun rebalancing halfway back to target and we will rebalance the rest of the way when we see signals that indicate markets are normalising.
Australian equities We remain underweight Australian equities due to relative valuations and a subdued outlook. We will rebalance in due time and in line with our approach to global equities.
Emerging-market equities Our preference for emerging market (EM) equities remains due to their attractive valuations.  We believe exposure to China is favourable as the country is likely to rebound ahead of other markets as production activity starts to pick up again.
Listed real assets1 Real assets remain at benchmark. Solid fundamental and favourable conditions (due to low interest rates) should support listed real assets, which generally outperform equities in periods of uncertainty.
Alternative growth We hold benchmark position on alternative growth assets as they can add to diversification and should provide protection if volatility in risk assets increases in the months ahead.
Defensive: fixed income
Defensive We maintain our benchmark strategy, but alter the mix by moving to benchmark fixed income and cash. Our portfolios will remain long duration, but in the near term, concentrated on international fixed income.
International  We look to reduce the portfolio’s bias towards international fixed income after the strong recent rally. We also see the recent rally in bond yields as appropriate to take profit and return to benchmark. We will continue to monitor the effect of coronavirus on bond markets.
Australia We maintain our preference for international fixed income though the fragile domestic economy remains supportive of Australian bonds. We remain neutral for now.
Cash We have a mild preference for fixed income over cash at the moment.
Currency: Neutral
Foreign currency hedge ratio2 We have retained our underweight Australian dollar hedge ratio. As a risk currency, AUD tends to fall in equity market sell-offs.


1. Comprises of 50/50 split between GREIT and infrastructure securities.

2. Percentage of developed-market and emerging-market equities hedged from foreign currency into Australian dollars.


Representative diversified portfolio with 70/30 growth/defensive assets.

As at March 2020.

Read the full Chief Investment Officer House View (PDF 981kB)


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