The chief investment officer of Australia’s largest super funds has brushed off suggestions that the volatility sparked by the coronavirus pandemic might put a permanent dent in global stock markets.
Speaking at the Yahoo Finance All Markets Summit on Thursday, AustralianSuper chief investment officer Mark Delaney faced questions about whether a prolonged recession resulting from drawn-out uncertainty could put an end to the up-and-down nature of share markets.
“There’s no more dangerous words in investing than: ‘This time, it’s different’. There’s no more dangerous words than that,” he said.
“And every time people say this time is different, you should probably do the opposite.”
He referenced the Pearl Harbour attacks of 1942 and the Cuban Missile Crisis, which were some of the lowest points in US stock history.
But despite the magnitude of the crises at the time, the market has always recovered, he said.
“The market only goes to low levels because of the uncertainty. And as the uncertainty resolves itself, the market goes higher,” he said.
The greater risk, Delaney said, is actually when there is “too much certainty,” and “uncertainty appears after that”.
When this happens, it pays for investors to be “countercyclical” – and to act opposite to what the herd mentality or your emotions might tell you.
“Look for downturns to add to your portfolio, and when things become really good, become cautious. It’s actually the opposite of your emotional impulse.”
The danger of uncertainty
In pinpointing the biggest economic risk to Australia right now, Delaney said uncertainty would continue to mount the longer it took for a Covid-19 vaccine to reach the public.
“The biggest risk, really, is that we can’t deal with Covid, and the optimism around a health solution for Covid doesn’t materialise, and the current circumstance rolls on for another two years or so.”
However, the risk of this – while serious – was fairly small, he added.
“Outside of that, policymakers – if they continue to support the economy – will enable the economy to work through what is … a very difficult period.”
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