• Shaun O'Keefe I Financial Adviser

Testing times can be good times too

It's normal to get concerned when the markets are a mess and your investments are declining. The thing is, they usually get this way because something messed them up - a global pandemic, bad economic news, wars etc. What's obvious is that news headlines proactively feed into the mess, influencing people and turning it in to a self-fulfilling outcome. Fear mongering headlines produce fearful outcomes.


But sometimes, a dose of reality delivered in a thoughtful way can do wonders.


Scott Pape, also known as The Barefoot Investor, wrote the below in a recent email which I thought was a succinct summary for where we're at right now. This brief recent history lesson kind of gives things some context - and a good reality check. Here is Ol' Barefoot responding to one of his subscribers who was feeling the pinch on their investments:

Let’s think about what’s happened in the last six months since you made your investment: We’ve had runaway inflation in the US, and in most parts of the world. We’ve had the threat of rising interest rates in a world awash with debt. We’ve had the Chinese property market imploding. We’re still dealing with the pandemic (China is still locking down millions of people). We’ve had commodity prices surging, and food prices at record highs. We’ve had ‘once-in-a-century’ floods in NSW and Queensland. Oh, and then we had the war in Ukraine. All things considered, I think you’re doing pretty well! I’d suggest you learn to take a longer-term view.

Mindset

A few weeks back I was having coffee with a mate. He's a finance broker, so I asked him how his clients were feeling in the current market with the rising tide of interest rates on the way. He said he's never been busier! Not the answer I was expecting, so I probed further. He told me that property values have probably peaked and his clients were refinancing to extract the equity in their homes and investment properties so they can get new loan approvals and expand their investments to increase their wealth. I have to admit, the fearful market sentiment had started to cloud me with some negativity too - but what he said shook me up afresh. My mindset and perspective needed to change, and what he told me was a great example that testing times can be good times too.


What could go right

Peter Switzer is an Australian economist and writer and is looking at the things which could go right for the markets in the very near term. They don't call him 'Positive Pete' for nothing. Take a look at what he thinks could go right and which would start to lead markets out of the doom and gloom:

  • The Ukraine war ends and oil, as well as other commodity prices fall, taking down inflation.Ukraine and Russian talks are happening now.

  • China beats its pandemic lockdown problems, which will KO the supply chain problems, which will also lower inflation. Latest reports say China plans to stop lockdowns by June 1.

  • Lower-than-expected inflation in the coming months reduces the need for too many interest rate rises in a short period of time. That means the interest rate concerns that drove stock prices down, especially for tech stocks, will dissipate. The big banks are predicting that we’ll see fewer rate rises here than have been forecasted by many of the doomsday merchants.

  • What we need to see is relatively strong economic data to hose down fired up fears about recession, especially in the US. And we need to see a global trend of falling inflation, and that will get investors excited.


The test is not the test

I've had some important conversations with my own concerned clients over recent months. It's not fun in the market right now - these are testing times ...with all the fear and anxiety and the feeling of powerlessness. But the situation will change again in time - nothing stays the same. Until then, we have to sit tight and control the controllables because there's just so much that is far outside of our control - and we've got to learn how to come to terms with that.


I'll finish with this. One of my mentors has a quote which I reflect on often and it's perfect for the times we're in.

The test is not the test. How you respond, that's the real test.
 

Shaun O'Keefe helps families feel more financially secure. He's found that he can help more people, more effectively when he helps families. As a fee-based financial planner, he works with families just like yours to bring personal values and financial resources in line so that you can keep focussed on the priorities in your life.


The information contained in this article is general in nature only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision concerning a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.

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