Markets

It was a mixed bag for self-funded retirees this reporting season. The big banks continued to deliver those precious franked dividends, Charter Hall gave the office sector a much-needed fillip, while Dexus reminded everyone just how much financial pain some property groups are still experiencing.

Sharp market downturns can play havoc with those in retirement who must draw down on their savings and have less capacity and time to wait for their investment portfolios to recover.

While retirees understandably fret when markets resemble a roller-coaster ride, their fears are misplaced. A new study shows that over the past three decades markets have performed strongly, the GFC, COVID, economic downturns and geopolitical events notwithstanding.

It was lance corporal Jones of Dad’s Army fame who immortalised those two words, ‘don’t panic’. It’s exactly the right advice for those in retirement who are seeing equity markets see-saw due to geo-political events, profit-taking and rising Japanese interest rates.

It might just prove a double whammy for self-funded retirees. A looming US recession is not only bringing sharemarket bears out of hibernation but could prompt the Reserve Bank to cut interest rates earlier than many analysts expected.

The last few years have been challenging for markets, but they’ve also reset the playing field for fixed interest. For those seeking income and capital protection in the event of an equities downturn, particularly retirees, it’s time to revisit credit, says Bentham Asset Management’s Richard Quin.

Australian retail investors are trading less since the height of the pandemic, as uncertainty over the direction of markets prompts them to accumulate cash. But while even the pros may be tended to blink, the overwhelmingly buy-and-hold retail cohort is proving its savvy, says nabtrade’s Gemma Dale.

With recessionary fears still dominating the outlook, investors looking to dip their toes into private credit should consider senior secured loans, which offer compelling relative value and added risk mitigation, Invesco said.

Berkshire Hathaway recently added 20.4 million shares of Apple, which now makes up about half its equity holdings. More recent moves suggest Warren Buffett may now be returning to his historical focus on value, via old-school energy investments.

Five per cent on a one-year term deposit will tempt a lot of investors, and with good reason, but equities have proven their worth over the long term. As ever, experts say, personal needs should guide investment selection.

After a punishing innings for her flagship ETF, ARK Invest founder Cathie Wood thinks investors need to stop living in the 70s. This time next year the Fed will be “running in the opposite direction” and deflation will dominate the market, she says.

While active can provides pockets of outperformance both here and globally, research from S&P Global suggests maintaining above-benchmark returns is difficult to maintain.