Ahead of the Curve: The Other Side

We’ve all seen the curve and we appreciate the reasons for trying to flatten the curve.

No interventions (red curve) means more deaths and a healthcare system not coping.

Intervention (blue curve) means flattening the curve enough to reduce deaths and allow the health system to cope with the expected hospitalisations. We achieve this with restrictions on travel, quarantining those with infection, self isolation for those at risk and social distancing for everyone else. Staying home to save lives.

We know Singapore flattened the curve. China claims it did.

Australia is ahead of the curve. We had some of the earliest cases out of China but also have lessons learned in Europe and in the US. Our curve is flattening.

Australians are ahead of the curve. Take a bow, healthcare workers and the rest of us.

We all have family members and friends doing it tough and it’s in our national character to look out for each other. And what a tough year already, 2020 began with the Great Dividing Range on fire. We are facing up to this new challenge with solidarity.

My stepson Liam (who lives with me) had a Covid 19 case in his personal training studio 14 days ago. His business shut down overnight but he has clawed back 75% of his billings through one on one training sessions via Zoom. Ahead of the curve? Yes, and we are proud of him. But we are equally thankful to Liam’s loyal clients for supporting small business. Same for small businesses all over Australia.

And now the business case.

The economic damage of flattening the curve (according to the Government) will be: Deeper. Wider. Longer.

The National Cabinet (made up of state, territory and federal governments) have been preparing us and planning for a six month economic hibernation.

16% of GDP has so far been thrown at the problem, a mix of welfare (jobseeker), medical support, business support, and employee support (jobkeeper).

Welfare payments doubled and a mechanism for six million workers to stay connected to their employer to have a job when we come out the other side

16% of GDP is a huge number, more than equivalent economies (other than Germany at 30%.).

We are not there yet.

But the conversation once we pass peak infections, peak deaths, which now looks likely to be weeks not months, will be “the other side”. The bridge to recovery.

The sharemarket is also starting to think about the other side. It rarely thinks about the next few weeks. The sharemarket is a longer term barometer – it’s looking several months out.

I am asked every day is it time to buy? My answer remains…Not Yet.

I don’t know if the sharemarket has found its bottom yet. We probably need to see peak fear in the United States and I am not sure we are there yet. Donald Trump is no longer saying what he said last week – the US will be up and running by Easter. This week he is preparing Americans for 100,000 to 200,000 deaths. And these deaths will peak in April.

Not Yet. It’s a brave investor who dives in too deep too soon, but for this old market veteran, there are buying moments opening up.

I do think the other side is closer than the Government is saying. In six months, (my birthday is 1 October), I believe we will be well and truly on the bridge to recovery.

Tony Bates

General Advice Warning: This is general advice only. Talk to your adviser if you need advice tailored to your personal circumstances and objectives

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