Good Afternoon
For those of you who enjoy your sport, I hope youâve been relishing the Olympics. Amid the headlines about our athleteâs great achievements the current market volatility is also getting a few headlines. To address this, weâd like to share our perspectives in a manner that is helpful and relates to your circumstances.
A News Filter For You
No doubt headlines about large market falls make people anxious. In fact, news outlets often glorify what is happening and ignore the broader perspective. Letâs start with a roundup of recent financial developments, filtered for you:
| Australia –
The RBA met yesterday, with rates to remain on hold at 4.35%, as recent inflation results have come in as expected. The unemployment rate is one of the key indicators to monitor.
Recent ASX volatility is providing some market jitters with investors becoming more cautious about the economy as fears of recessions start to build.
The August ASX reporting period will provide plenty of insight and direction for the second half of 2024. |
UK and Europe â
The Bank of England cut rates on 1st August by 0.25%, the first rate cut since 2020. This follows the European Central Bank. Keir Starmer is yet to announce any concrete proposals on taxes or pensions, but we expect them. Local markets have held up reasonably well, with rate cuts generally cheered by investors. Local bonds are also holding up and offering diversification benefits. |
US â
In a busy period, the Federal Reserve is very likely to cut rates in September, especially given recent evidence of a weak jobs market. The US election is also twisting, with Kamala Harris hitting the lead in recent polling. Finally, US tech companies are experiencing a correction after running hot earlier this year. Again, bonds are providing a ballast.
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Asia â
Japan is making headlines, with the Bank of Japan raising interest rates unexpectedly. This has triggered the Japanese yen to rise quickly and Japanese stocks to fall, unwinding recent moves the other way. Other emerging markets, including China, have had a bit of a challenging run but are holding up better amid the volatility.
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On face value, it appears that bigger up and down days in markets (or vice versa) are upon us. However, this is not a sign of a broken marketâit is very typical of what happens when investors are trying to digest new information quickly. It wonât last forever and wonât get in the way of us achieving your financial goals.
It is also worth noting the nature of setbacks. They are often a reversal of what has already run a little hot. For example, the Nasdaq in the US (an index of technology companies) has fallen by 10% since 9th July but is still up 13% this year. We can see a similar pattern across the globe.
Markets Never Move in Straight Lines
One key aspect weâd like to highlight is the benefit of diversification which helps your investments do well in a range of scenarios. With equities facing a patch of recent volatility, bonds have offered a ballast. This is by design. The economy and markets can change path, sometimes quickly and unexpectantly, which is exactly why we invest across a range of opportunities that complement each other. Our aim is to pursue a steady path that seeks to maximise returns without taking excessive or unwanted risk.
Changes That Can Benefit You
Turning to actions, this could become a great opportunity to add value in the pursuit of your financial goals. To do that, you will hopefully find the below helpful:
- Donât try to pick the exact bottom of any market correction – and donât expect us to either. Markets donât work this way. As Peter Lynch famously said, âFar more money has been lost by investors preparing for corrections or trying to anticipate corrections than has been lost in corrections themselvesâ. From all our analysis and knowledge, the best approach is to stay the course and invest consistently. The key is to understand probabilities and keep your money at work over long time horizons. The philosophy of âinvesting for the long-termâ helps ride out market ups and downs over multiple market cycles.
- Consider interest rates. The RBA has remained in its holding pattern since November 2023, keeping the cash rate at 4.35%. Whilst weâre seeing inflation coming down, the question still remains: is the trajectory steep enough? Australiaâs unemployment rate is a pivotal piece of the puzzle, especially if inflation remains stubbornly persistent.
- Stay focused on your goals. We have a financial plan in place to help you achieve what is important to you. If youâd like us to review your projections and planning, please get in touch on 1300 014 368. This will help you to stick to the plan â and please remember that changes in markets are part of the journey to achieving those goals.
As always, we are very happy to help and discuss any of your concerns. Please contact our office on 1300 014 368 or via email to chat
The team @ FPD
