Market Update – April 2020

April marked a strong reversal in the negative sentiment from the prior month as the general public lockdowns due to COVID-19 implemented by most countries in March began to demonstrate success in slowing the spread of the virus. This drove expectations of an easing in restrictions and increased optimism for an economic recovery. There was also a boost to equity market sentiment from the unprecedented monetary and fiscal stimulus measures announced globally during late March and into April.

Monetary policy action also restored some confidence and reduced volatility in the bond markets, with corporate bonds outperforming Government bonds. Investment grade credit posted the strongest bond returns over the month whilst most Government bond yields continued to trend marginally lower.

In stark contrast, as noted below the financial and economic data around the world were very negative for the month of April but the positive sentiments in both the equity and bond markets were not distracted by these underlying economic conditions.

Oil prices continued to fall during April with WTI Crude dropping 8% even as OPEC and Russia negotiated a 20% supply reduction, which cut global production by 9.7M barrels per day. Also, for the first time in history, oil futures for delivery in May briefly fell into negative, as the supply glut and storage capacity constraints meant producers were willing to pay traders to take oil.

US economic data continued to weaken across all measures of economic activity. The US labour market further deteriorated, with the initial unemployment claims well over 30 million by the end of the month. The unemployment rate for April skyrocketed to 14.7%, the worst figure since the Great Depression. The consumer sector and industrial production also posted their largest declines in decades as retail sales slumped 8.7% and manufacturing output dropped 6.3% in March.

In Europe preliminary data showed that economic growth in the Eurozone contracted by 3.8% quarter-on-quarter for the March quarter, but further falls are expected in the June quarter as most lockdown measures were implemented in late March. Europe saw sharp falls in business activity with the Purchasing Managers Indices (PMI) in April at their lowest recorded levels since the survey began in 1992. Consumer and business sentiment also declined significantly in March.

Consistent with other global economies dealing with the impacts of COVID-19, Australia recorded sharp falls in business confidence and employment. The RBA held cash rates steady at 0.25% and continued to reaffirm its monetary policy support of the economy during the COVID-19 pandemic. This included the RBA’s bond purchasing program aimed at maintaining bond yields at target levels and liquidity in the market, as well as open market operations to support credit and maintain low funding costs in the economy

The investment returns of the major markets for one and three months, financial year, and one year to 30 April 2020 are summarised below.

Market Performance – 30 April 2020





Australian Equities





Overseas Equities (Hedged into AUD)





Overseas Equities (Unhedged into AUD)





Emerging Markets (Unhedged into AUD)





Australian Property (Unlisted)





Australian Property (Listed)





Global Listed Property (Hedged into AUD)





Australian Bonds





Overseas Bonds (Hedged into AUD)










Australian Dollar vs. US Dollar





Source – JANA, FactSet

The Australian share market followed the optimism surrounding global equities and ended the month with the S&P/ASX 300 Accumulation Index up 9%. All domestic equity sector returns were positive in April, with Energy (25.2%), Information Technology (21.8%) and Consumer Discretionary (16.4%) achieving the largest gains during this risk-on environment. The defensive sectors were generally the worst performing, with Consumer Staples (2.6%), Financials (2.9%) and Utilities (3.2%) lagging the broader market Index. Overall, large caps underperformed small and mid-cap stocks over the month.

Both developed markets and emerging markets experienced positive returns, with small cap and mid cap equities benefitting most out of the rally. The MSCI World Index ex-Australia (hedged into AUD) rose 10% over the month. In developed markets, Austria (15.3%) and USA (13.2%) outperformed the broader market, while Portugal (1.6%) and Spain (1.7%) lagged significantly. Within emerging markets, South Africa (16.4%) and India (15.3%) outperformed the broader emerging markets Index while Indonesia (2.4%) and Morocco (-2.3%) underperformed.

The Australian Dollar appreciated against most of the major developed market currencies over the month, increasing 7.0% relative to the US Dollar and 7.2% relative to the Euro.

Australian bonds posted a negative return over the month, while overseas bonds posted a positive return.

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