What a way to start a (shortened) week for the ASX.
The S&P 500 is now showing a positive return so far in 2020, and the ASX may well close the day above 6,000 points for the first time since March.
What pandemic, right?
I wrote about it last week, but it bears repeating: these are strange and unusual times.
I think you should keep investing. I will be.
(Those who are saying not to might well be the same people who told you not to invest in March and April, too, so be careful who you listen to.)
But that doesn’t mean I expect it to be smooth sailing.
Make no mistake, the economy is on the proverbial mat.
Unemployment, here and in the US, has spiked. Whether it keeps climbing may well depend on what ‘echo’ effects we feel — which businesses can’t make it by themselves when government support runs out, and which employees end up getting laid off once JobKeeper winds down.
No, I’m not being a pessimist. I remain resolutely optimistic for the long term.
Instead — and as usual — I’m encouraging you to remain realistic.
Volatility is not over. Bad news is not all in the rear vision mirror (unfortunately).
We will overcome. We will, in time, thrive.
But it might take time and there might be stumbles.
For years, I’ve been telling people “these are good times, but be mentally prepared for when the tough times come”.
I hope you’ve been with us long enough to have heard and internalised the message.
For the last few months, I’ve been saying the reverse: “These are tough times, but make sure you keep investing, so you’ll benefit when the good times return”.
In the event, they returned far more quickly than even I expected: the ASX is up by almost one-third since mid-March.
I hope you held on.
I hope you kept investing.
I hope you kept your eyes on the horizon.
And now?
Now it’s a mix of both.
Australian shares are still the best part of 17% off their highs.
They’re up about 32% from their lows.
The long term future is still, in my view, very bright.
But the ground between here and there is uncertain. Or, perhaps, it’s more certain, but that certainty includes hills and valleys, meadows and thick forest.
Be prepared for anything and everything in the short term, Fools.
But keep your eyes on the (long term) prize.
—–
2020 has had everything — and we’re not even half-way done, yet!
It’s had droughts, fires and floods. A pandemic and an ongoing trade war. And yes, a market that has soared, crashed and is seemingly rising, phoenix-like, from the ashes.
It has also had injustice and protest.
I tend not to use this space to talk much about things outside business and investing (and associated government policy, from time to time), but I did want to share something from our company that made me incredibly proud last week.
It’s a message that stands on its own as a moral view.
Last week, The Motley Fool chose to stand and be counted.
In part, the statement read:
“At The Motley Fool, we believe that diverse voices, insights, and expertise fuel innovation and human progress in the marketplace of business, and the world at large.
and:
“We reject racism, inequality of opportunity, hatred, and cruelty.
“We will expand our commitment in helping ensure that our employees, our members, our future members, and our fellow humans are safer, treated fairly, and given every opportunity to live out their true potential.”
The company is also distributing US$100,000 to employees to “support equality, justice, and peace in a way that’s meaningful to them.”
You can read our full statement, here.
All that’s required for evil to flourish, Simon Wiesenthal said, is that good people do nothing.
The standard we walk past is the standard we accept, according to Lieutenant General David Morrison.
Both men are, of course, right.
I’m proud of our company for doing the right thing.
This is not a political act. It’s not a partisan act. It’s not virtue-signalling.
It’s adding our collective voice to improving our society. To simply standing for what is right.
For what it’s worth, there are also all-but irrefutable arguments for exactly the same view being taken purely out of economic self-interest. I might write about them another day.
Today, though, it’ll just be the moral argument. Which, really, isn’t an argument at all, but something we should all embrace, because it’s right.
—–
Lastly, a Buy idea.
The market has bounced, hard, as I mentioned above.
Many of the companies that seemed cheap a little more than 2 months ago, have gone on to new highs, or have gained back much of what they lost.
Which, for the bargain hunter, can be frustrating.
“Why, oh why, didn’t I buy when those stocks were so cheap”.
Maybe it was a lack of spare cash. Maybe it was just the emotionally challenging task of buying while the market seemed to be in (virtual) flames.
I hear that! I invested quite a bit of my spare cash a little early — before the bottom. And while I did buy more during the down days, I wish I’d have had more cash to do more buying.
In that spirit, I want to highlight a company whose shares I own (for the record) and that’s an active Buy recommendation of Motley Fool Share Advisor.
Yes, shares are up 28% from their lows.
But they are still down 37% from its pre-crisis 2020 high.
The company is Treasury Wine Estates (ASX: TWE).
And here’s the thing: on the most recent pre-pandemic numbers I saw, wine sales from Australia to China were up a full 40% year-on-year: 20% more volume (more bottles) plus 20% higher prices (essentially, but not completely, more profit per bottle).
If (and I think when) that export growth recommences — and looking out a few years past that — if more Asian customers in general, and more Chinese customers in particular, enjoy more high-priced, premium Australian wines, then Treasury is in the box seat.
And at today’s price — higher than it was, but much lower than it was before that! — I think the shares are a great buy (the wine is pretty good, too!).
Fool on!
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More reading
- Not keen on Westpac? Then buy these top ASX dividend shares instead
- Why didn’t Warren Buffett buy more shares in the recent bear market?
- Top brokers name 3 ASX 200 shares to sell today
- 2 ASX shares in the firing line of trade tensions with China
- Are these China-exposed ASX shares in danger in 2020?
Motley Fool contributor Scott Phillips owns shares of Treasury Wine Estates Limited. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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