As per last week, we feel it appropriate for the interim to continue to focus on markets from the prism of the coronavirus and its impact.

Listen to the recording below:

Market over past week

Equity markets were significantly weak in the U.S and Australia particularly, but all asset markets including safe havens such as gold, bonds and cryptocurrency all lost value.

Selling of safe haven assets is indicative of widespread liquidation – gold is -10% from its highs, Bitcoin -40% from its highs and even the composite Australian bond index lost -2% last week.

Locally, Australian banks saw heavy selling as concerns over the severity of the quarantine period and its impact on employment reached a fever pitch.

The Thursday RBA announcement committing to domestic QE (dedicated interest rate targeting on 3-year bonds at 0.25%) and with it a $90bn facility for banks to keep small and medium size businesses liquid through the virus crisis saw major banks lose -10% or so as investors began to fathom the impact on sector profitability, particularly as it seemed the banks were being dragged into national service to protect the economy.

It was noted by top-rated banks analysts at UBS, that Australian banks are now trading below book value for the first time since 1993 – the end of the last recession.

Across the board companies withdrew earnings guidance faced with the complete uncertainty as to when governments will ease quarantine restrictions on their constituents.

Despite the heavy losses last week and emerging value in some major Australian shares, we believe patience will be rewarded.

We continue to believe that the market will not find its feet for longer than 1-2 days until the United States infection rate looks to have peaked, and regrettably that still looks 4-6 weeks away.

The U.S and Spain and the U.K are broadly a week behind Italy in the infection curve and with the U.S having dragged their heels both on quarantine measures and testing, it feels nigh on inevitable that the coming fortnight will see a major deterioration in the case numbers there.
Until such time as the world’s biggest economy looks to have the virus under some control, all risky assets will remain under pressure.

Equally, the news out of Europe remains negative – this weekend Italian and Spanish governments extended mandatory quarantine for a further fortnight until April 3rd with no promise that at that point it won’t be extended further.

The signs point toward an extended quarantine globally which in turn makes the liquidity crunch all the more acute for businesses and households affected.

Portfolio thoughts

As above, we retain the view that remain defensive until such time as the United States situation has stabilised feels most appropriate.

Investors are seeking liquidity right now and we feel that recommended portfolios are appropriately defensive and liquid.

Our preference for international equities has been rewarded with the fall in the Australian Dollar last week to as low as 55-56c – the MSCI World ex-Australia equity index is down -13% YTD, less than half that of the ASX200’s -28% fall with dividends.

However, we are increasingly of the view that the AUD is now reaching a low point and so are actively considering switching part of our international equity funds into hedged versions.

In the defensive portfolio’s we remain very comfortable with how we are positioned and would encourage investors to do their best to ignore the share prices of listed fixed income trusts such as the Metrics Master Income Trust (MXT), Metrics Opportunities Trust (MOT) and Qualitas Real Income Fund (QRI).

Whilst it is uncomfortable seeing these trusts trade 15-30% under net asset value, we do believe the current size of the discounts to be excessive and temporary and we believe strongly that these trusts are managed in a manner that exceeds their listed peer group.

In the case of MXT investors should remember that 60%+ of the portfolio is in senior loans and over half of the portfolio is investment grade lending. The remaining balance is in senior private debt and real estate debt with strong equity protection.

Whilst we have been thrilled with the performance of the Ardea Real Outcome fund thus far, we believe the opportunity looks incredibly strong for gains in the months ahead.

The dislocation in asset fixed income markets currently was described as the most fertile investment opportunity set these managers had seen in their careers, and accordingly we are looking to increase our allocation here in recommended portfolios.

Lastly, on the Australian equity portfolio performance has been hampered by the large exposures we have had to mid-cap stocks.

In recent days we have made increased room to take advantage of opportunities following the market fall and feel strongly that not only will many of our positions see improving performance, but that our cash weightings can be put to good use upgrading the quality of the portfolio holdings in the weeks and months ahead.

Some good news

The chart below is of the Australian share-market valuation using the average corporate earnings over the past decade rather than the current year earnings.

The aim is to smooth out the earnings cycle and is called the Shiller P/E.

As you can see, the Australian share-market is fast approaching the low point it achieved back in the GFC.

Given that Australia’s economy has been quite soft for much of the last 5-6 years, this is a reasonable sign that equity valuations, particularly of major Australian companies, are becoming more attractive.

Looking ahead

• Wednesday: AU Skilled Vacancies (Feb)
• Thursday: US Weekly Jobless Claims, US Weekly Bloomberg Consumer Confidence
• Friday: US Michigan Consumer Confidence (Mar)

This week the major focus will be on the initial March economic data due Tuesday, but then on the weekly jobless claim figures due Thursday night.

Weekly jobless claims measure those seeking welfare benefits for the first time, and it is predicted that this week will see a flood of 2m+ new applicants, making the past week the largest jump in welfare in history by a factor of almost 3x.

Key dividends

• Wednesday 25th March 2020: Div Ex-Date – SEEK (SEK), Webjet (WEB); Div Pay Date – Altium (ALU), ASX (ASX), Downer (DOW), Insurance Australia (IAG), Sonic Healthcare (SHL), Worley (WOR)
• Thursday 26th March 2020: Div Ex-Date – Flight Centre (FLT); Div Pay Date – Medibank (MPL), Reece (REH), SANTOS (STO)
• Friday 27th March 2020: Div Ex-Date – NABPD; Div Pay Date – AGL (AGL), Coles (COL), Origin (ORG), Telstra (TLS)

The information in this recording and article contains general advice and is provided by Primestock Securities Ltd AFSL 239180. That advice has been prepared without taking your personal objectives, financial situation or needs into account. Before acting on this general advice, you should consider the appropriateness of it having regard to your personal objectives, financial situation and needs. You should obtain and read the Product Disclosure Statement (PDS) before making any decision to acquire any financial product referred to in this recording and article. Please refer to the FSG (acprimefinancial.com.au/fsg) for contact information and information about remuneration and associations with product issuers. This information should not be relied upon as a substitute for professional advice, and we encourage you to seek specific advice from your professional adviser before making a decision on the matters discussed in this recording and article. Information in this recording and article is current at the date of this recording and article, and we have no obligation to update or revise it as a result of any change in events, circumstances or conditions upon which it is based.

Yesterday the Prime Minister announced further support to Australian Small Business. Whilst we are all facing extremely difficult times I am pleased to hear the following comments from the Prime Minister:

“We want to help businesses keep going as best they can and for as long as they can, or to pause instead of winding up their business. We want to ensure that when this crisis has passed Australian businesses can bounce back. Our focus is on cushioning the blow and providing hope to every Australian that we will get through this and come out the other side together. We know this will be temporary. That’s why all our actions are geared towards building a bridge, keeping more people in work, enhancing the safety net for those that aren’t and keeping businesses alive so they can get to the other side and stand up their workforce as quickly as possible. We know Australia’s more than 3 million small and medium businesses are the engine room of our economy. When they hurt, we all hurt. The next few months are going to be a difficult journey but we all have a role to play to adapt to the changes we’re facing, to cushion the impact of what is happening and to pull together so we can bounce back when we get to the other side.”

Below is a summary of the support package aimed to support Small Businesses:

Assistance to businesses to keep people in a job

Boosting Cash Flow for Employers

The Government is providing up to $100,000 to eligible small and medium sized businesses, and not‑for-profits (including charities) that employ people, with a minimum payment of $20,000. Under the enhanced scheme from the first package, employers will receive a payment equal to 100 per cent of their salary and wages withheld (up from 50 per cent), with the maximum payment being increased from $25,000 to $50,000. In addition, the minimum payment is being increased from $2,000 to $10,000. The payment will be available from 28 April 2020. The payments are tax free, there will be no new forms and payments will flow automatically through the ATO.

Small and medium business entities, not for profits & charities with aggregated annual turnover under $50 million and that employ workers are eligible.

An additional payment is also being made from 28 July 2020. Eligible entities will receive an additional payment equal to the total of all of the Boosting Cash Flow for Employers payments received. 

Regulatory protection and financial support for businesses to stay in business

Coronavirus SME Guarantee Scheme

The Government will establish the Coronavirus SME Guarantee Scheme which will support small and medium enterprises (SMEs) to get access to working capital to help them get them through the impact of the coronavirus. Under the Scheme, the Government will guarantee 50 per cent of new loans issued by eligible lenders to SMEs.

The Scheme will complement the announcement the Government has made to cut red-tape to allow SMEs to get access to credit faster. It also complements announcements made by Australian banks to support small businesses with their existing loans.

Providing temporary relief for financially distressed businesses

The Government is temporarily increasing the threshold at which creditors can issue a statutory demand on a company and the time companies have to respond to statutory demands they receive. The package also includes temporary relief for directors from any personal liability for trading while insolvent. The Corporations Act 2001 will be amended to provide temporary and targeted relief for companies to deal with unforeseen events that arise as a result of the Coronavirus.

This builds on the support for business and business investment provided in the first economic support package, which included:

• increasing the instant asset write off
• backing business investment by providing accelerated depreciation deductions
• supporting apprentices and trainees
• targeted support for Coronavirus-affected regions and communities

Other Government Support Provided – Support for workers and households

Coronavirus supplement

The Government is temporarily expanding eligibility to income support payments and establishing a new, time-limited Coronavirus supplement to be paid at a rate of $550 per fortnight. This will be paid to both existing and new recipients of the JobSeeker Payment, Youth Allowance jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit.

The Coronavirus supplement will be paid for the next 6 months. Eligible income support recipients will receive the full amount of the $550 Coronavirus supplement on top of their payment each fortnight.

An increase of up to 5,000 staff for Services Australia will assist to support delivery of new Government measures.

Payments to support households

In addition to the $750 stimulus payment announced on 12 March 2020, the Government will provide a further $750 payment to social security and veteran income support recipients and eligible concession card holders, except for those who are receiving an income support payment that is eligible to receive the Coronavirus supplement.

This second payment will be made automatically from 13 July 2020 to around 5 million social security, veteran and other income support recipients and eligible concession card holders. Around half of those that benefit are pensioners.

The first payment will be made from 31 March 2020 to people who will have been on one of the eligible payments any time between 12 March 2020 and 13 April 2020.

Early release of superannuation

The Government will allow individuals in financial stress as a result of the Coronavirus to access up to $10,000 of their superannuation in 2019-20 and a further $10,000 in 2020-21.

Eligible individuals will be able to apply online through myGov for access of up to $10,000 of their superannuation before 1 July 2020. They will also be able to access up to a further $10,000 from 1 July 2020 for another three months. They will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.

Temporarily reduce superannuation minimum drawdown rates

The Government is temporarily reducing superannuation minimum drawdown requirements for account based pensions and similar products by 50 per cent for 2019-20 and 2020-21. This measure will benefit retirees by providing them with more flexibility as to how they manage their superannuation assets.

Reducing social security deeming rates

On top of the deeming rate changes made at the time of the first package, the Government is reducing the deeming rates by a further 0.25 percentage points to reflect the latest rate reductions by the RBA. As of 1 May 2020, the lower deeming rate will be 0.25 per cent and the upper deeming rate will be 2.25 per cent.

If you would like any assistance in accessing the above benefits, please contact any of our experts below:

Victoria

• Brendan Brown – brendanb@primefinancial.com.au
• Simone Quin – simoneq@primefinancial.com.au
• Paul Minieri – paulm@primefinancial.com.au
• Jade Nicholls – jaden@primefinancial.com.au
• Stuart Thomson – stuartt@primefinancial.com.au

Brisbane

• Matthew Smith – matts@primefinancial.com.au
• John Driscoll – johnd@primefinancial.com.au
• Sean Fincham – seanf@primefinancial.com.au

Sydney

• John Driscoll – johnd@primefinancial.com.au
• Sean Fincham – seanf@primefinancial.com.au

Please click here to read a fact sheet produced by the Australian Government with regards to cash flow assistance for small businesses.

This post is provided by Prime Accounting and Business Advisory Pty Ltd. Liability limited by a scheme approved under Professional Standards Legislation. This post is not a substitute for independent professional advice. We do not warrant the accuracy, completeness or adequacy of the information or material in this post. All information is subject to change without notice. We and each party providing material displayed in this post disclaim liability to all persons or organisations in relation to any action(s) taken on the basis of currency or accuracy of the information or material, or any loss or damage suffered in connection with that information or material. You should make your own enquiries before entering into any transaction on the basis of information or material in this post. Please ensure you contact us to discuss your particular circumstances and how the information provided applies to your situation.

The Morrison Government has announced some welcome relief for retirees, income support recipients, casual workers and sole traders in the face of deteriorating economic impacts of the coronavirus pandemic.

• Minimum pension halved
• Deeming rates cut further
• 2nd $750 economic support payment
• $550 pf Coronavirus Supplement
• $10,000 super hardship withdrawal

Temporarily Reduce Minimum Superannuation Pension Drawdown

Retirees will have more flexibility as to how they manage their superannuation assets due to the ability to reduce minimum superannuation pension drawdowns by 50% for the current financial year (2019-20) and in the next financial year (2020-21).

The table below illustrates the current and temporarily reduced minimum drawdown rates for account based pensions, noting that the measure also applies to other types of super pension.

Depending on income needs, this allows retirees to suspend monthly or quarterly payments for the remainder of 2019-20; reduce monthly or quarterly payments for the remainder of 2019-20 and all of 2020-21; or halve annual payments normally made in June for this financial year and next.

Please speak to your adviser if you wish to amend your payment arrangements.

Social Security Deeming Rates Cut

To reflect the latest RBA rate reductions, the Government is further reducing the deeming rates applying to financial assets under the Centrelink means tests for income support payments.

The below table illustrates the asset levels at which the two deeming rates apply to singles versus couples:

The new lower rates apply from 1 May 2020.

A second $750 economic support payment

In addition to the $750 stimulus payment announced on 12 March 2020 and due to be paid from 31 March 2020, a further $750 economic support payment will be made from 13 July 2020 to Social Security and Veterans’ Affairs income support recipients and eligible concession card holders.

Those receiving an income support payment (eg JobSeeker Payment) eligible for the $550pf coronavirus supplement (below) do not receive the second economic support payment.

Expanded Income Support Criteria and $550 Coronavirus Supplement

The Government is temporarily expanding eligibility and qualification criteria for income support payments (JobSeeker Payment, Youth Allowance JobSeeker, Parenting Payment, Farm Household Allowance and Special Benefit) for the next six months.

The expanded criteria is designed to assist Sole Traders and Self-employed people, and those caring for someone infected or in isolation as a result of contact with Coronavirus.

The Government will provide a temporary Coronavirus Supplement of $550pf for six months to people receiving the abovementioned benefits.

Early Release of Superannuation

Individuals including Sole Traders suffering financial hardship due to the COVID-19 pandemic will be able to access $10,000 from their super in the current financial year before 1 July 2020 and a further $10,000 in the next financial year from 1 July 2020 for another three months.

The amounts released will be tax-free and will not affect Centrelink or Veterans’ Affairs payments.

Treasurer Josh Frydenberg indicated that those eligible to receive the Coronavirus Supplement, as well as sole traders or casual workers whose income has fallen by 20% or more as a result of the coronavirus, will be eligible to apply by completing an online declaration via their my.gov.au account.

What to do?

If you’d like further information on the above measures, please contact us.

The information in this article contains general advice and is provided by Primestock Securities Ltd AFSL 239180. That advice has been prepared without taking your personal objectives, financial situation or needs into account. Before acting on this general advice, you should consider the appropriateness of it having regard to your personal objectives, financial situation and needs. You should obtain and read the Product Disclosure Statement (PDS) before making any decision to acquire any financial product referred to in this article. Please refer to the FSG (acprimefinancial.com.au/fsg) for contact information and information about remuneration and associations with product issuers. This information should not be relied upon as a substitute for professional advice, and we encourage you to seek specific advice from your professional adviser before making a decision on the matters discussed in this article. Information in this article is current at the date of this article, and we have no obligation to update or revise it as a result of any change in events, circumstances or conditions upon which it is based.

Premier Daniel Andrews and Treasurer Tim Pallas announced a $1.7 billion economic survival and jobs package, which has been developed following discussions at National Cabinet and complements the work of the Federal Government. 

As part of the package, the Government will provide full payroll tax refunds for the 2019-20 financial year to small and medium-sized businesses with payroll of less than $3 million.  Payments will start flowing next week and will save eligible business up to $113,975 a year, with businesses saving an average of $23,000. This assistance is a refund, not a loan. The same businesses will also be able to defer any payroll tax for the first three months of the 2020/21 financial year until 1 January 2021.

Commercial tenants in government buildings can apply for rent relief.  A move private landlords are also being encouraged to undertake.  Also 2020 land tax payments will be deferred for eligible small businesses.

The Government will pay all outstanding supplier invoices within five business days. The private sector is urged to do the same where possible. The Government will also support the hospitality sector by waiving liquor licensing fees for 2020 for affected venues and small businesses.

The Government will also provide $500 million to establish a  Business Support Fund. The fund will support the hardest hit sectors, including hospitality, tourism, accommodation, arts and entertainment, and retail.

The Government will work with the Victorian Chamber, Australian Hotels Association and Ai Group to administer the fund, which will help these businesses – which may not be eligible for payroll tax refunds due to their size – survive and keep people in work.

The Government will establish a $500 million  Working for Victoria Fund in consultation with the Victorian Council of Social Services and Victorian Trades Hall Council. The fund will help workers who have lost their jobs find new opportunities, including work cleaning public infrastructure or delivering food – providing vital contributions to our state’s response to the pandemic and affording those Victorians security when its needed most.  The Government will also facilitate job matching to help Victorians find short-term or casual roles.

If you would like to understand more about this Economic Support Package, please contact:

• Matt Murphy – mattm@primefinancial.com.au
• Brendan Brown – brendanb@primefinancial.com.au
• Simone Quin – simoneq@primefinancial.com.au
• Paul Minieri – paulm@primefinancial.com.au
• Jade Nicholls – jaden@primefinancial.com.au
• Stuart Thomson – stuartt@primefinancial.com.au

This post is provided to you by Prime Accounting and Business Advisory Pty Ltd. Liability limited by a scheme approved under Professional Standards Legislation. This post is not a substitute for independent professional advice. We do not warrant the accuracy, completeness or adequacy of the information or material in this post. All information is subject to change without notice. We and each party providing material displayed in this post disclaim liability to all persons or organisations in relation to any action(s) taken on the basis of currency or accuracy of the information or material, or any loss or damage suffered in connection with that information or material. You should make your own enquiries before entering into any transaction on the basis of information or material in this post. Please ensure you contact us to discuss your particular circumstances and how the information provided applies to your situation.

The Queensland government released its own state stimulus package late last week, offering payroll tax relief for eligible businesses and low-interest loans to help businesses retain employees.  

Payroll Tax relief package

• The QLD Government will extend the offer of a six-month payroll tax deferral to all affected QLD businesses.
• This will be applicable to you, if you are an employer paying less than $6.5 million in Australian taxable wages, or if your business has seen a negative effect on turnover, profit, customers, bookings, sales or supply contracts – compared to normal operating conditions – due to been directly or indirectly affected by COVID-19.

Support for SMEs

• In addition to the payroll tax deferral to SMEs, the Queensland government has made $500 million available in loans to support workers in businesses affected by COVID-19.
• This new $500 million loan facility, will comprise of loans up to $250,000 and will be interest free for the first 12 months, to support Queensland businesses in business and help retain staff.
• Further detail is expected to be released regarding the application process by Wednesday 25/3.

If you would like to understand more about this Economic Support Package, please contact:

• Matthew Smith – matts@primefinancial.com.au 
• John Driscoll – johnd@primefinancial.com.au

This post is provided to you by Prime Accounting and Business Advisory Pty Ltd. Liability limited by a scheme approved under Professional Standards Legislation. This post is not a substitute for independent professional advice. We do not warrant the accuracy, completeness or adequacy of the information or material in this post. All information is subject to change without notice. We and each party providing material displayed in this post disclaim liability to all persons or organisations in relation to any action(s) taken on the basis of currency or accuracy of the information or material, or any loss or damage suffered in connection with that information or material. You should make your own enquiries before entering into any transaction on the basis of information or material in this post. Please ensure you contact us to discuss your particular circumstances and how the information provided applies to your situation.

The NSW Government has released a stimulus package that will help to protect communities and jobs in the face of the COVID-19 outbreak over the next six months. This package has two key components — $700 million in extra health funding and $1.6 billion in tax cuts to support jobs.

Key elements of the NSW COVID-19 package include:

Business support and jobs

• Waiver of payroll tax for businesses with payrolls of up to $10 million for three months (the rest of 2019-20). This means these businesses will save a quarter of their annual payroll tax bill in 2019-20
• Bring forward the next round of payroll tax cuts by raising the threshold limit to $1 million in 2020-21
• Wave a range of fees and charges for small businesses including bars, cafes, restaurants and tradies
• Employ additional cleaners of public infrastructure such as transport assets, schools and other public buildings
• Bring forward maintenance on public assets including social housing and crown land fencing
• Bring forward capital works and maintenance.

If you would like to understand more about this Economic Support Package, please contact:

• Matthew Smith – matts@primefinancial.com.au 
• John Driscoll – johnd@primefinancial.com.au

This post is provided to you by Prime Accounting and Business Advisory Pty Ltd. Liability limited by a scheme approved under Professional Standards Legislation. This post is not a substitute for independent professional advice. We do not warrant the accuracy, completeness or adequacy of the information or material in this post. All information is subject to change without notice. We and each party providing material displayed in this post disclaim liability to all persons or organisations in relation to any action(s) taken on the basis of currency or accuracy of the information or material, or any loss or damage suffered in connection with that information or material. You should make your own enquiries before entering into any transaction on the basis of information or material in this post. Please ensure you contact us to discuss your particular circumstances and how the information provided applies to your situation.

The federal government’s coronavirus stimulus package is without doubt generous, but they’ve forgotten about one important segment of our community – self-funded retirees.

Once a super fund member moves into pension mode, they are required by law to draw a minimum amount out of the pension account each year. This is calculated as a percentage of a member’s pension balance based on their age. To comply, people can be forced to dispose of investments if their fund holds an insufficient cash balance to satisfy these minimum drawdown requirements.

You may recall during the global financial crisis (GFC) between 2007 and 2009 the government made the welcome decision to decrease the minimum pension withdrawal requirement for Australians in pension mode. This measure of relief was extended over several financial years. Minimum pension payment amounts were halved for certain pensions and annuities for the 2009, 2010 and 2011 financial years. The reduction was subsequently adjusted to 25 per cent for 2011/12 and 2012/13.

Many retirees who don’t need to live off their pension savings wait until the end of the financial year to make the drawdown from their fund. This means a significant number of Australian pensioners may be required to liquidate investments to satisfy the pension minimum, in many cases doing so when the value of shares or investments have plummeted as a result of the market effect of COVID-19. How is this fair?

I’m delighted to see the government making stimulus handouts, but let’s extend the focus to the superannuation sector – and I’m talking more than a one-off handout of $750 if you’re obtaining Centrelink benefits.

I’d like to see Canberra repeat the precedent set during the GFC and decrease minimum pension requirements. Give pensioners the opportunity to sit on their investments until market conditions (eventually) recover.

Written by Olivia Long, Managing Director – SMSF

In light of these extraordinary times in which we are living, we thought it best this week to dedicate the weekly market update exclusively to our thinking insofar as the spread of the virus and its impact on global financial markets.

Events are changing daily, so please treat this in the context of a volatile landscape and as our best guess at this moment in time.

• We expect investment market volatility, both up and down, to persist for 6-8 weeks through until around mid-late May using the Chinese and Korean infection rates as a rough guide
• This assumption could prove optimistic on the grounds that the US only began mass testing 10 days ago
• Europe is now in shutdown with Spain, France and Italy all largely under quarantine and retail and services limited to supermarkets, pharmacies, petrol stations and medical
• New York was effectively placed on similar lockdown terms Monday morning with bars and restaurants limited to takeaway and all cinemas, nightclubs etc closed
• It would seem fair to expect that London might find itself in a similar situation in the days ahead
• Australian schools are seeing term dates brought forward, with some immediate term endings announced as of today

The negative

This sudden cessation of ‘business as usual’ will be a shock to the system for all in the western world but will have a devastating impact on businesses in the hospitality, travel, accommodation and recreation services industries.

Cashflows will stop still for potentially 2-3 months.

Liquidity conditions globally tightened at the fastest rate since the GFC as concerns escalated as the credit worthiness of those seeking liquidity.

We should expect unemployment to escalate rapidly as staff are laid off and businesses seek to conserve cash, which is precisely why emergency policy both in the U.S and Australia is focused is being targeted at payroll taxes and subsidies for employment of apprentices etc.

Bad debts will emerge both within corporates and businesses in the coming 6 months which will tarnish bank earnings alongside the crunch to net interest margins from the rush to zero interest rates.

Corporate earnings will see major loss of momentum and with respite unlikely before the 2H, investors will remain cautious in their outlook.

Lastly, the suggestion that the US administration has been slow to react to the evolving crisis has seen President Trump’s public support plummet such that there is now an even-money chance of a change in the White House come November, and with that the threat to the economy of new death tax rulings, a $15/hour minimum wage and a rolling back of the Trump corporate tax cuts.

The positive

This situation is highly nuanced.

In spite of the many economic negatives the coronavirus is likely to inflict on business, the economy and personal balance sheets, its important to understand that markets have already fallen a significant -30% in Australia, that central banks and governments have unleashed the stimulatory spigot in recent days and that this virus is highly likely to be a short-term phenomenon.

The ASX200 is back at 2013 levels.

Australian major bank share prices are now back trading under book value for the first time since 1993 according to UBS analysis.

Many good quality companies have halved or more in the past fortnight despite having robust cashflows, balance sheets and secular growth.

Lastly, Australia is in the fortunate position of being not only isolated by geography, but also that our government finances are in a position to be able to stimulate our economy via tax cuts or ongoing infrastructure investment.

The fall in the Australian Dollar offers ballast to the likely economic contraction near term also, however we are increasingly of the view that the AUD <62 will prove near enough to a long term low.

The outcome

Our defensive portfolio posturing allows us to be in a position to be adding to risk over the next 6-8 weeks by allocating more to growth assets and by utilising cash in portfolios.

The aim will be to upgrade the quality of our various portfolios where possible, to seek out cash-flow and balance sheet strength and earnings growth.

Looking ahead

• Monday: US Empire Manufacturing (Mar)
• Tuesday: AU RBA Meeting minutes, US Retail Sales (Feb), US Job Openings (Jan), US NAHB Housing Market Confidence (Mar)
• Wednesday: AU Westpac Leading Index (Feb), US Building Permits (Feb), US Housing Starts (Feb)
• Thursday: AU Employment (Feb) , US Philadelphia Fed Business Outlook (Mar)
• Friday: N/A

Friday 13th March, 5pm values

Friday 13th March, closing values

From an economic standpoint perhaps the most telling data release each week over the coming 2 months will be US weekly jobless claims which are reported every Thursday night.

Key dividends

• Monday 16th March 2020: Div Pay Date – CBAPD, CBAPE, CBAPF, CBAPG, CBAPH, CBAPI
• Tuesday 17th March 2020: Div Pay Date – MQGPB, NABPF, NABPB
• Wednesday 18th March 2020: Div Ex-Date – Carsales.com (CAR); Div Pay Date – Platinum (PTM), Tabcorp (TAH), WBCPI
• Thursday 19th March 2020: Div Ex-Date – Crown (CWN), WBCPG
• Friday 20th March 2020: Div Pay Date – ANZPG, ANZPH, NABPE

The information in this article contains general advice and is provided by Primestock Securities Ltd AFSL 239180. That advice has been prepared without taking your personal objectives, financial situation or needs into account. Before acting on this general advice, you should consider the appropriateness of it having regard to your personal objectives, financial situation and needs. You should obtain and read the Product Disclosure Statement (PDS) before making any decision to acquire any financial product referred to in this article. Please refer to the FSG (acprimefinancial.com.au/fsg) for contact information and information about remuneration and associations with product issuers. This information should not be relied upon as a substitute for professional advice, and we encourage you to seek specific advice from your professional adviser before making a decision on the matters discussed in this article. Information in this article is current at the date of this article, and we have no obligation to update or revise it as a result of any change in events, circumstances or conditions upon which it is based.

Watch video

Key market themes

Update on the coronavirus

• The Italian Prime Minister Tuesday morning announced a nationwide ‘quarantine’ restricting travel without a business or health-related justification until at least April 3^rd. Schools and universities are already closed and public events will be cancelled.
• President Trump plans to unveil a fiscal aid package on Tuesday designed to alleviate some of the pressures on business and individuals in the wake of coronavirus quarantine measures. The package will likely see a payroll tax cut and paid sick leave for those hourly workers quarantined by the virus.

U.S. Politics

• Joe Biden’s success in winning 10 of the 14 states up for grabs at last week’s Super Tuesday has put him in a strong position to win the Democrat nomination and to challenge President Trump at the November election
• Trump’s questionable handling of the coronavirus contagion has dented his poll standing and seen Biden leap to near enough neck and neck in the odds for

Economic data released

US Economic data finished February strong and untouched by virus concerns

• Manufacturing data has stabilised with the new year and China trade deal, whilst consumer confidence and small-business confidence remains elevated and untouched by coronavirus fears
• February payroll data surged by 273,000 jobs

Australian economic data however remains as mixed as ever

• Weekly ANZ Consumer Confidence this week dropped to its lowest level on record
• January Building Approvals saw a substantial monthly pullback that took annual approvals -15%. Apartment approvals dropped to their lowest monthly figure since 2013.
• February Australian Industry Group data on the Construction industry remain significantly in contraction
• Q4 GDP posted an annual rate of 2.2%, marginally ahead of expectations

Observations from the past week

High Yield Credit Spreads blow out

Alongside the sell-off in global equity indices, corporate credit markets similarly saw investors seeking to de-risk portfolios.

The chart below shows the average spread above swap rates on US High Yield bonds which this month has blown out from 300bp over to 642bp over currently, but remains below the levels achieved during the European debt crisis in 2011 and an eerily similar sell-off in 2015 when oil prices collapsed and led to fears of defaults from highly indebted oil exploration companies.

Looking ahead

• Monday: N/A
• Tuesday: AU NAB Business Confidence (Feb), US NFIB Small Business Confidence (Feb)
• Wednesday: AU Westpac Confidence (Mar)
• Thursday: US Bloomberg Weekly Confidence
• Friday: US Michigan Consumer Sentiment (Mar)

Friday 5pm values

Friday closing values

Key dividends

• Monday 9th March 2020: Div Ex-Date – QUBE (QUB), REA Group (REA). WBCPI; Div Pay Date – Metrics (MXT, MOT)
• Tuesday 10th March 2020: Div Ex-Date – Reliance Worldwide (RWC), Sonic Healthcare (SHL); Div Pay Date – MQGPD
• Wednesday 11th March 2020: Div Ex-Date – ANZPG/ANZPH BWX (BWX), Brambles (BXB), CSL(CSL), NABPE, Regis Healthcare (REG); Div Pay Date – APA (APA)
• Thursday 12th March 2020: Div Ex-Date – Costa (CGC), NABPC, WBCPE/WBCPF/WBCPH
• Friday 13th March 2020: Div Ex-Date – ANZPE/ANZP, Boral (BLD); Div Pay Date – Domain (DHG), Dominoes (DMP)

The information in this video and article contains general advice and is provided by Primestock Securities Ltd AFSL 239180. That advice has been prepared without taking your personal objectives, financial situation or needs into account. Before acting on this general advice, you should consider the appropriateness of it having regard to your personal objectives, financial situation and needs. You should obtain and read the Product Disclosure Statement (PDS) before making any decision to acquire any financial product referred to in this video and article. Please refer to the FSG (primefinancial.com.au/fsg) for contact information and information about remuneration and associations with product issuers. This information should not be relied upon as a substitute for professional advice, and we encourage you to seek specific advice from your professional adviser before making a decision on the matters discussed in this video and article. Information in this video and article is current at the date of this video and article, and we have no obligation to update or revise it as a result of any change in events, circumstances or conditions upon which it is based.