Subject: Market Update
Prepared for: Members
Date: 17 March 2020
It is important to remember that superannuation is a very long-term investment for the vast majority for Crescent Wealth’s members. While markets are currently extremely volatile, Crescent Wealth remains vigilant in monitoring the situation and managing the portfolios closely.
Over the last month, we have seen a significant sell-off of global and Australian equity markets due to concerns relating to the coronavirus emerging from China. This volatility continues despite coordinated efforts of central banks around the world the cut interest rates and adds stimulus into the market. The US Federal Reserve has now cut rates for a second time overnight to a range of 0-0.25% and the Reserve Bank of Australia has cut rates once already to 0.5%.
The World Health Organisations latest situation report on coronavirus (known as COVID-19) show clearly that China now has greater control of the situation than does the rest of the world. Currently, the number of new cases reported outside China is over 10 times higher than the number of new cases reported in China.
In addition to the health impacts of the coronavirus, the disruption to global supply chains has been significant due to the factory closures in China and more recently the impact as the rest of world slowly starts to shut down events and public gatherings. Add to this the recent collapse of the alliance between OPEC and Russia, which has caused oil prices to drop to $30 a barrel. This will have a negative impact on company profits and GDP globally, with markets now pricing in a much higher probability of a global recession.
The Crescent Wealth portfolios are inherently conservative due to our views on the previous extremes of market valuations and our high holdings in Islamic Cash. The cash holdings of the Conservative option (48%), Balanced option (29%) and Growth option (12%) all remain high and have positioned the funds well for a market sell-off.
While US and Australian equity markets have fallen approximately 20% in the last month, the 1-year performance of the Conservative option (+2.0%), Balanced option (+3.5%) and Growth option (+4.5%) to 11 March 2020 remains positive, net of all fees and tax.
It is important to remember that superannuation is a very long-term investment for the vast majority for Crescent Wealth’s members. While markets are currently extremely volatile, we remain vigilant in monitoring the situation and managing the portfolio closely.
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Talal currently serves as a Non-Executive Director on the Whitlam Institute and Western Sydney University Foundation Council Board. He also serves as Chairman of First Quay Capital and Chairman of the Australian Arab Dialogue. Talal has also served on the Australia Post, Board of Sydney Ports, Macquarie University and the Western Sydney Area Health Service and the Chairman of the Department of Foreign Affairs and Trade; Council of Australia Arab Relations. In an executive capacity, Talal spent 10 years at PwC as a director and strategist, and at investment firm Babcock & Brown in the Corporate Finance Group and later in the Technical Real Estate Division. Later Talal held leadership positions in Better Place Australia, Platinum Hearing and Star Transport Australia.