A year on from the ASX crash, here's what we've learnt

One year ago, the S&P/ASX 200 tumbled down to its COVID-19 low, erasing over seven years of gains. Little did we know how strongly the market would rebound in the next 12 months, rising almost 50% - and what a ride it has been!

For investors there has been a lot to navigate - from ongoing local and global COVID-19 outbreaks, Australia's first recession in 29 years followed by the quick emergence of positive economic indicators, geopolitical and trade war tensions, the US election and natural disasters, the last year is one for the history books.

As we mark one year since the market freefall, it would be amiss to not stop, pause and reflect on the learnings from this period, as well as uncovering key themes for the coming month.

Navigating times of turbulence

In times of significant uncertainty, it can be tempting to sell out or reposition your portfolio in response to every announcement in the 24/7 news cycle. Many investors did sell down in March 2020 which locked in their losses - and they weren't able to benefit from the sizeable market rebound which followed.

Those investors who stayed the course, or used the downturn as an opportunity to buy, have been rewarded significantly on the upside. When the next crisis rocks markets, remember that history shows that markets are resilient and do bounce back, even if the outlook is uncertain or murky.

When it comes to making investment decisions, quality companies with surplus cash, strong and predictable earning streams, and solid governance are most equipped to ride out market volatility, particularly those in non-discretionary sectors. Healthcare and consumer staples continue to outperform even in periods of low economic growth, uncertainty, and volatility, as demand for their services is likely to grow.

Tech on the clock

Tech stocks truly shone while everyone was locked indoors, but now their time in the limelight may be drawing to a close.

A further tech stock correction might back could be on the horizon. US tech stocks (measured by the Nasdaq) already tumbled 10% from mid-February 2021 to early-March 2021, before rallying back up 5% to March 23, 2021. Closer to home, there the Aussie tech sector fell 21% over the same period, before rallying about 5% as well to March 23, 2021.

So what's pressuring tech stocks and keeping them underwater? It's two things:

Firstly, bond yields. Aussie bond yields are back at a two-year high and are now offering better yields than a lot of tech stocks. As many investors may know, most tech stocks do not even pay dividends.

Secondly, investors are favouring stocks with greater balance sheets, greater earnings and share price momentum (think mining companies and big banks such as Macquarie (ASX:MQG), Lynas Corporation (ASX:LYC) and Bluescope Steel (ASX:BSL).

So, these two elements have caused Aussie tech stocks to go into correction territory during the February to March period, with many investors taking the opportunity to lock in their profits.

This is why investors have started reducing their holdings in expensive tech stocks with high debt levels, and are opting for economic comeback stocks - such as The ASX (ASX:ASX) and Telstra (ASX:TLS).

Yet, an opportunity lies in buying good tech quality stocks at a discount. For example, Afterpay (ASX:APT) shares have already started to pick up again as investors see value in the largest Aussie tech stock as it expands into the European market and embarks on launching its business in Asia. Many Aussie investors have forgotten one of Afterpay's largest shareholders is Tencent, which owns WeChat, and the company has flagged wanting to offer "more payment options" to customers. Watch this space for potential collaboration between Afterpay and Tencent.

So this is why investors shouldn't throw the baby out with the bathwater. Just because tech stocks are out of fashion right now doesn't mean investors should stop monitoring for a discounted entry point.

Economic indicators continue on the up

More broadly Australia's recovery is on the up, with overall economic growth predicted to be 4.1% this year.

Employment is back at pre-COVID levels as the unemployment rate fell from 6.4% to 5.8% in February as 90,000 people - rather than the 30,000 expected - got back to work. The RBA also pledged to keep interest rates at a record low until wages catch up in 2024.

This will be crucial for sustained growth as JobKeeper payments are set to end on March 28.

During March, the Morrison Government revealed a $1.2 billion package to reinvigorate the domestic travel, aviation and hospitality industries who were hard hit by lockdowns and border closures through 2020 and the start of the new year.

The scheme announcement to subsidise half the price of 800,000 airfare tickets to regional destinations, which normally rely on tourists, saw travel stocks bounce.

Flight Centre (ASX:FLT) shares have risen to its highest point since last March, while Qantas (ASX:QAN), Webjet (ASX:WEB) and Sydney Airport (ASX:SYD) have also seen considerable gains. Sentiment towards the travel sector has understandably been boosted by the news.

Maybe consider other companies which may be set to benefit, including hospitality venues like Redcape Hotel (ASX:RDC) and air traffic control company, Adacel Technology (ASX:ADA).

Get stories like this in our newsletters.