One of the biggest questions on many investors’ minds in recent weeks has been, just how bad will the economic contraction be? But Chris Rands, Portfolio Manager for the Nikko Australian Bond Fund, says this isn’t the question to focus on. Instead, the focus should be on how long the downturn will last.

“It’s going to be weak. We all know it’s going to be weak. You take a quick walk around outside and you’ll see that absolutely nothing is open. If it’s down 5, 10, 15 percent, nothing would really shock me. It’s more important to say, “how long is it going to last?””

In this episode of The Rules of Investing podcast, Chris speaks to us about the stability of Australia’s financial institutions, when he first realised that COVID-19 presented a material risk to markets, and how the crisis has affected his view on Australian housing.

Time stamps

  • 2:33 - The realisation that COVID-19 would be bigger than expected
  • 4:41 - Chris’ take on the Russian play at oil prices
  • 6:10 - What level of contraction should we expect this quarter?
  • 8:41 - Base case for a recovery - V, U or L shape?
  • 12:54 - How Chris’ view on housing has changed 
  • 17:00 - Are banks as well capitalised as we think? And can they withstand a recession?
  • 20:23 - How are Australian credit markets holding up?
  • 24:23 - Are bonds still attractive at current prices?
  • 28:48 - Where Chris is putting money to work at the moment
  • 30:06 - Areas to be underweight
  • 31:23 - Chris answers our 3 favourite questions

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Mark S

Sure bear markets might be a process, but a lot of instos seem to holding off buying stocks at the moment that there's another leg down. Which may be true, but as they keep telling everyone, the job isn't to pick the bottom, but buy at rationale prices stocks with strong underlying fundamentals that have been sold down. In reality, shouldn't have instos gone back in right now>? TG that mum and dad investors are being given an opportunity to participate in some attractive capital raisings, with those by Webjet looking pretty compelling.