Covid-19 Fuelled S&P 500 Selloff Last Year. Here Are Some Lessons Learned.
Kanebridge News
    HOUSE MEDIAN ASKING PRICES AND WEEKLY CHANGE     Sydney $1,666,984 (-0.52%)       Melbourne $1,025,140 (-0.29%)       Brisbane $1,079,790 (+0.21%)       Adelaide $987,421 (+0.48%)       Perth $959,727 (+1.13%)       Hobart $774,699 (-0.85%)       Darwin $821,142 (+4.72%)       Canberra $946,671 (-0.99%)       National $1,096,933 (+0.01%)                UNIT MEDIAN ASKING PRICES AND WEEKLY CHANGE     Sydney $779,804 (-0.05%)       Melbourne $501,457 (-0.97%)       Brisbane $680,117 (+0.71%)       Adelaide $516,640 (-0.17%)       Perth $539,067 (+1.01%)       Hobart $528,172 (+0.12%)       Darwin $391,098 (+0.26%)       Canberra $495,303 (+3.15%)       National $576,956 (+0.40%)                HOUSES FOR SALE AND WEEKLY CHANGE     Sydney 12,076 (-85)       Melbourne 14,218 (-287)       Brisbane 8,085 (-106)       Adelaide 2,943 (+40)       Perth 7,410 (-63)       Hobart 1,202 (-4)       Darwin 165 (-4)       Canberra 1,087 (-18)       National 47,186 (-527)                UNITS FOR SALE AND WEEKLY CHANGE     Sydney 9,230 (-171)       Melbourne 7,611 (-611)       Brisbane 1,520 (-30)       Adelaide 404 (-17)       Hobart 212 (+1)       Hobart 215 (-13)       Darwin 287 (+2)       Canberra 1,186 (-1,198)       National 22,003 (-2,039)                HOUSE MEDIAN ASKING RENTS AND WEEKLY CHANGE     Sydney $800 ($0)       Melbourne $595 ($0)       Brisbane $650 ($0)       Adelaide $640 (+$10)       Perth $700 ($0)       Hobart $583 (+$3)       Darwin $720 (-$30)       Canberra $710 ($0)       National $681 (-$3)                UNIT MEDIAN ASKING RENTS AND WEEKLY CHANGE     Sydney $750 ($0)       Melbourne $590 ($0)       Brisbane $650 (+$10)       Adelaide $550 (+$15)       Perth $665 (+$15)       Hobart $500 (+$18)       Darwin $550 (+$35)       Canberra $590 (+$5)       National $615 (+$10)                HOUSES FOR RENT AND WEEKLY CHANGE     Sydney 5,732 (-16)       Melbourne 7,664 (+4)       Brisbane 3,892 (-6)       Adelaide 1,458 (-8)       Perth 2,305 (-13)       Hobart 236 (+7)       Darwin 76 (-1)       Canberra 465 (+5)       National 21,828 (-28)                UNITS FOR RENT AND WEEKLY CHANGE     Sydney 7,852 (-14)       Melbourne 5,484 (0)       Brisbane 1,900 (+20)       Adelaide 413 (-1)       Perth 778 (+6)       Hobart 90 (-8)       Darwin 86 (+7)       Canberra 544 (-22)       National 17,147 (-12)                HOUSE ANNUAL GROSS YIELDS AND TREND       Sydney 2.50% (↑)      Melbourne 3.02% (↑)        Brisbane 3.13% (↓)     Adelaide 3.37% (↑)        Perth 3.79% (↓)     Hobart 3.91% (↑)        Darwin 4.56% (↓)     Canberra 3.90% (↑)        National 3.23% (↓)            UNIT ANNUAL GROSS YIELDS AND TREND       Sydney 5.00% (↑)      Melbourne 6.12% (↑)      Brisbane 4.97% (↑)      Adelaide 5.54% (↑)      Perth 6.41% (↑)      Hobart 4.92% (↑)      Darwin 7.31% (↑)        Canberra 6.19% (↓)     National 5.54% (↑)             HOUSE RENTAL VACANCY RATES AND TREND       Sydney 2.0% (↑)      Melbourne 1.9% (↑)      Brisbane 1.4% (↑)      Adelaide 1.3% (↑)      Perth 1.2% (↑)      Hobart 1.0% (↑)      Darwin 1.6% (↑)      Canberra 2.7% (↑)      National 1.7% (↑)             UNIT RENTAL VACANCY RATES AND TREND       Sydney 2.4% (↑)      Melbourne 3.8% (↑)      Brisbane 2.0% (↑)      Adelaide 1.1% (↑)      Perth 0.9% (↑)      Hobart 1.4% (↑)      Darwin 2.8% (↑)      Canberra 2.9% (↑)      National 2.2% (↑)             AVERAGE DAYS TO SELL HOUSES AND TREND       Sydney 33.9 (↑)        Melbourne 32.6 (↓)     Brisbane 35.9 (↑)      Adelaide 30.2 (↑)      Perth 41.5 (↑)      Hobart 37.1 (↑)        Darwin 23.7 (↓)     Canberra 35.3 (↑)      National 33.8 (↑)             AVERAGE DAYS TO SELL UNITS AND TREND       Sydney 32.6 (↑)      Melbourne 32.8 (↑)        Brisbane 31.9 (↓)     Adelaide 29.3 (↑)      Perth 41.0 (↑)      Hobart 37.4 (↑)        Darwin 41.2 (↓)     Canberra 42.9 (↑)      National 36.1 (↑)            
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Covid-19 Fuelled S&P 500 Selloff Last Year. Here Are Some Lessons Learned.

Money managers reflect on what the ups and downs of 2020-2021 have taught them.

By Akane Otani
Mon, Mar 8, 2021 1:22amGrey Clock 4 min

A year ago, the longest-ever bull market ended.

The comeback in the stock market since then has been nothing short of astounding.

The S&P 500 took just 126 trading days to swing from a record to a bear market and back to a new high—marking the fastest such recovery in history. That was even as market prognosticators warned stocks were due for another bout of selling, based on the growing death toll and unprecedented job losses caused by the coronavirus pandemic.

The U.S. is still in the midst of the same pandemic that led to the spring selloff. And the market’s future remains mired in uncertainty. Just last week, surging bond yields sent many of the most popular technology stocks of the past decade sliding.

The stock market is now barely above the point where it began the year. This coming week, traders say they will be keenly focused on inflation data, which may add to the recent debate over whether inflationary pressures are picking up.

Whatever the data show, many investors say the ups and downs of the past year have reminded them that some investing truths are eternal. Among them:

The markets look way ahead of us

Stocks bottomed out March 23. The next day, a furious rally sent the Dow up more than 11% for its best session since 1933.

The pandemic was far from over. In the same week, politicians and health experts declared New York City the epicentre of the coronavirus pandemic, the U.K. went into lockdown and Japan postponed the Tokyo Olympics.

How was a market rally possible?

Investors like to cite the adage that markets are forward-looking. There is no clearer example of that in recent memory than what happened last year.

Those buying stocks last spring weren’t necessarily doing so out of a belief that the pandemic was close to an end. They were betting on the future turning out to be better. And they were right. Companies are expected to report a 3.9% increase in earnings for the fourth quarter of last year. That is a modest increase, but nevertheless would mark the first quarter of year-over-year growth since the end of 2019, according to FactSet.

An investor waiting for a clear turning point on the pandemic—say, the first vaccine approval—would have missed much of the market’s ride higher.

“It’s hard, it feels counterintuitive for a lot of investors, but if you only focus on buying things that were loved in the past, you’ll always be buying high and selling low,” said Don Calcagni, chief investment officer of Mercer Advisors.

The moment was also fleeting for stay-at-home stocks. Many of them soared in the first half of last year. But as scientists pushed closer to developing safe and effective vaccines, momentum for those trades faded. Domino’s Pizza Inc., Zoom Video Communications Inc. and McCormick & Co. have one thing in common: their shares peaked last fall.

What was bad news for stay-at-home stocks was good news for companies in the travel business, which began rallying in the final months of 2020. While the S&P 500 is essentially flat this year, Norwegian Cruise Line Holdings Ltd., American Airlines Group Ltd. and Delta Air Lines Inc. have notched double-digit increases on a percentage basis.

Cycles move quickly

If last year’s selloff felt like it happened with vicious speed, that is because it did. It took just 16 trading days for the S&P 500 to fall from its Feb. 19 record into a bear market, or a 20% drop from that high. That marked the index’s fastest-ever such descent, according to Dow Jones Market Data.

The comeback that followed was also historically swift. (Though it probably didn’t feel like it for weary traders.)

“You’re really going to either have to play the speed game all the way around, or you gotta grin and bear it, be patient and just hang on and really stick to your buy and hold strategy,” said Richard Grasfeder, senior portfolio manager at Boston Private.

The pace of the action in more speculative corners of the market—think bitcoin, dogecoin or any of the “meme stocks”—has been even wilder.

On Jan. 28, for instance, GameStop Corp. started the trading day at $265, down 24% from the prior afternoon. It swung as high as $483 and as low as $112.25 before ending the day somewhere in between at $193.60.

“The fact that with technology, information moves so fast…I think you can make the case that it has really sped up market cycles,” said Ben Carlson, director of institutional asset management at Ritholtz Wealth Management.

Stock pickers love volatility, but it doesn’t always love them back

The feeling that markets are moving faster than ever should be a boon to active managers. Analysts have long argued that the professionals have the best opportunity to prove themselves when there is plenty of dispersion: meaning the gap between the market’s losers and winners is wide.

But that didn’t pan out in the first half of 2020, a period rife with volatility. Just 37% of U.S. large-cap equity funds managed to beat the S&P 500 over the first six months of last year, according to S&P Dow Jones Indices. (The firm hasn’t yet released its full-year report on active managers.)

Will stock pickers buck the trend in 2021?

So far, they are off to a good start. Bank of America found 70% of U.S. large-cap mutual funds beat their benchmarks in February, the highest share since 2007.

Much of that outperformance appears to have been driven by the fact that technology stocks have underperformed lately. Technology has a big pull on market cap-weighted indexes like the S&P 500, so active managers who haven’t heavily weighted the sector in their own funds have historically struggled to beat the market. This year, it seems a number of fund managers got the timing right. Many are holding on to more shares of companies like banks, utilities and energy producers, which have held up better in the market pullback.

On the other hand, investors who have made a name for themselves betting big on technology have been stung by widening losses. Among the highest-profile casualties of the past few weeks: Cathie Wood’s ARK Investment Management LLC, whose funds have sizable holdings in companies like Tesla Inc., Roku Inc. and Square Inc.

The growth versus value debate has played out countless times over the past decade, with little reward for value investors. But with rising interest rates putting pressure on long-loved corners of the market, money managers like John Allen, chief investment officer of Aspiriant, are feeling hopeful.

“We believe this is going to be a decade where active investing prevails,” Mr Allen said.



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Superannuation is the first thought when it comes to self-funding retirement. Yet it is hardly the only option for doing so.

Just as we have a choice in how and where we work to earn a living, many people also have a choice in how to fund their retirement.

It is possible and sometimes preferable to leave your superannuation untouched, allowing it to continue growing. Some or all of your income can come from alternative sources instead.

Here are some alternatives you can consider.

1. Downsize your home

For many who own their own homes, the equity accrued over decades can eclipse the funds in superannuation. However, it’s theoretical money only until it is unlocked.

Selling up the family home and downsizing – or rightsizing – for retirement allows you to pocket those gains tax-free and simultaneously relocate to a more suitable home with lower upkeep costs.

Up to $300,000 from the proceeds can be contributed by a downsizer to boost your super, and the remainder can be used to fund living expenses or actively invested.

Remember that while the sale proceeds of your home are tax-free, any future profits or interest earned from that money will be taxable.

2. Part-time work

Semi-retirement allows you to gradually step into retirement. You continue earning income and super while working part-time, keeping a foot in the workforce while testing the waters of your new found free time.

Doing so also offers scope to move into different roles, such as passing on your skills to future generations by teaching/training others in your field of expertise, or taking employment in a new area that interests you and is closer to home.

3. Self-employment

Retirement from a full-time position presents a good opportunity to pursue self-employment. With more time and fewer commitments on your hands, you have greater scope to turn your hobby into a business or leverage your professional skills and reputation as an external consultant.

Also, for the self-employed and those with a family business, director’s loan repayments from the company are typically tax-free, offering a potentially lucrative source of

income and a means of extracting previous investments into the business without selling your ownership stake.

Helen Baker

4. Investments

Rental property income (from residential or commercial properties) can supplement or even provide a generous source of income. The same applies to dividends from shares.

These are likely to be more profitable if you own them well before retirement.

Income that is surplus to your everyday needs can be reinvested using tax-effective strategies to grow your future returns.

5. Family trust

A family trust could be used to house investments for yourself and other relatives, building intergenerational wealth.

Trusts allow funds to be allocated to beneficiaries to manage marginal tax rates and stretch the money further, you have control over how income is split between different family members and have flexibility for changing circumstances.

6. Selling collectables

You may not realise the value of items you have collected over the years, such as wine, artwork, jewellery, vintage cars, and antiques.

Rather than have them collect dust or pay to store them, they could be sold to fund your living costs or new investments.

Where possible, avoid selling growth assets in a depressed market – wait until you can extract maximum value.

7. Obtaining a part-pension

Part-pensions are not only possible but valuable in making your superannuation stretch further. They still entitle you to a concession card with benefits in healthcare, transport, and more.

Take these savings even further by requesting pensioner discounts with other companies, on everything from utilities to travel and insurance to eating out.

Also, don’t overestimate the value of your assets as part of the means test. It’s a common mistake that can wrongly deny you a full or part-pension.

Plan ahead

However, you ultimately fund your retirement, planning is crucial. Advice would hopefully pay for itself.

Understand your spending and how those habits will change before and during retirement, then look to investments that offer the best fit.

Consider a mixture of strategies to diversify your risk, manage your tax liabilities and ensure ongoing income.

Above all, timing is key. The further ahead you plan, the more time you have to embrace additional opportunities and do things at the right time to maximise their value. You’ve worked hard and now is your chance to enjoy the fruits of your labour!

Helen Baker is a licensed Australian financial adviser and author of the new book, Money For Life: How to build financial security from firm foundations (Major Street Publishing $32.99). Find out more at www.onyourowntwofeet.com.au 

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