Market Recap 30th March

It’s widely known that the domestic economy is made of three things: household consumption, private sector investment and government spending. This week has revealed that the economy is built up on dominoes: when one falls, they all fall…starting with consumer confidence. 

Have you been thinking about that new flat-screen TV to Netflix your way through social isolation? Probably not, considering that this week’s ANZ/Roy Morgan measure of consumer sentiment recorded a nosedive of 27.8 per cent, with belief that ‘it is a good time to buy a major household item’ falling 32.2 per cent. As the graph below shows, the tumultuous bout of pessimism associated with the coronavirus has managed to bring consumer confidence 17 per cent lower than during the GFC in 2008.

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Up, up, up…and down: this week saw the stock market ride hefty roller-coaster waves. On Wednesday, stock markets surged in the last fifteen minutes of trading to close just shy of 5000 at 4998.1 points, with a total gain of 5.5 per cent across the day. The optimistic rise added onto the 5.8 per cent gains witnessed on Monday. This late rebound can be attributed to the White House’s agreement to pass a $2 trillion ($3.3 trillion AUD) stimulus package aimed at augmenting welfare benefits, hospital injections and subsidised loans for small businesses.

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However, Friday saw markets take a nasty tumble of 5.3 per cent to close at 4842.4, eliminating the two day advance seen in the graph above. While Qantas and Commonwealth Bank shares came roaring back on Wednesday with a 26.3 per cent and 9.5 per cent gain respectively, all sectors finished lower on Friday. All four major banks fell by more than 6.3 per cent with Healthcare falling 7.1 per cent.  

Aaaand, another domino knocks down and this time its employment rates. AMP Capital Chief economist Shane Oliver forecasts unemployment rates rising 9.4 per cent this year, affecting 1.22 million people. The record low 0.25 per cent interest rate announced by the Reserve Bank means that a near predicted recession would double the current unemployment rate of 5.1 per cent. This comes after news of more than 30,000 retail staff being stood down over the next few weeks as retail giants such as Premier Investments and Accent group temporarily close all stores until late April. 

Closed for inspections, open for infections: looming unemployment rates knocks back on housing market resilience. Coinciding with many agents being advised to halt open homes in favour of private inspections, this week saw a steep pull away from auctions with the national auction clearance rate falling 18.7 percent to 61.3 per cent. Ultimately, this may see housing prices fall up to 20 per cent as the combination of more mortgage defaults and unemployment fears weaken an already vulnerable economy. 

All in all, this week has shown us the true impact of the ‘economic domino effect’: the solution to keeping the domestic economy afloat seems to be just how quickly we can build, fall and repeat.