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Liquidity in fixed income markets is a fluid concept (pun intended) that is plentiful in normal market conditions and can quickly disappear in a dislocated market – akin to a tide going out. The seizure of the US Treasury and global credit markets amid the COVID-19 crisis, highlighted the systemic liquidity risk facing bond investors and how a decline in liquidity can result in large drawdowns.

As difficult as it is to envisage, there is life beyond COVID-19 for real estate. While performance of Australian Real Estate Investment Trusts (A-REITs) has been challenging, it is not unexpected given the rapid implementation of the global shutdown and isolation measures. Property’s performance is fundamentally underpinned by activity and interaction between people. Accordingly, social distancing policies enacted around the world have had a profound impact on the usage of commercial property.

Given Real Estate Investment Trusts (REITs) recent challenging performance during the COVID shutdown, investors are naturally questioning their allocations to the asset class. However, while it is tempting to draw conclusions surrounding the drawdown and recovery to date, considerable uncertainty remains around the speed at which economies re-open and the shape of a longer-term recovery.

Market participants, especially equity investors, can be forgiven if the words déjà vu spring to mind during this COVID-19 period. Although there are definite similarities between the Australian equity market drawdowns and subsequent recoveries of COVID-19 and the global financial crisis (GFC), COVID-19 has proven to be the GFC in fast-forward.