Hello, everyone, it’s Michael Fava, one of the senior advisors here at Forbes Fava Financial Planning. We hope this finds you all well.
Today we wanted to speak just for a few minutes regarding the strength of growth markets, both shares and property here in Australia and certainly overseas.
I just want to backtrack 15 to 18 months in March of last year, we saw the share markets, which were pretty much at high levels took a sharp fall in March of last year, in four weeks, the average index here and in the United States dropped 39%. When I say index, I’m talking about things like the all-ordinaries index, the Dow Jones index, all of these terms you hear on the seven Nightly News. Normally just before Jane comes on and talks about the weather.
Now, panic, well, it’s not easy to go through that. It’s a difficult time for all, adding to all of this the health issues that we’re getting across people’s minds what’s going on with this pandemic. But what we’ve seen as we’ve always seen during these volatile occurrences is that anyone who panics and moves to safe haven fixed right type investments of means probably would have done themselves a pretty serious kind of disservice. Because the markets recovered.
By October, we’ve seen record highs November, Christmas week, the American shame market hit a record high close twice since January, the US share market has had over 30 record high closes and in Australia, we are also hovering around record high levels.
Now clients are asking me, you know, this is fantastic. What’s going on? How is this happening during a pandemic? Now let’s talk about the experts. Our own government’s Treasury Department last year was predicting doom and gloom unemployment would hit 13%. In their opinion, guys, unemployment didn’t hit 13%. It didn’t even get the 10%. We got to 7% there was a lot of stimulus and support. Yes, unemployment has now fallen to below what it was before the pandemic.
Let’s talk about property. I’ve been hearing for eight years from the best experts in the country that property is going to crash and I’m going to talk about a plateau or a 5% decline. I’m talking to 30 to 40%. Crash property hasn’t crashed in the last eight years property’s gone from strength to strength in most capital cities around the country.
So look, yes, we listen to experts, we get so many different expert opinions on any one topic. On any given day. We take it all in, we digest it, but we go on and provide our clients with sound long term advice.
Now, what am I finding through my client reviews? My clients are cashed up. Those who normally keep 20- 30 grand in the bank. Guess what, they got a lot more because nobody’s gone on holiday. The European cruises haven’t happened. The Trafalgar tours around Europe haven’t happened. Taking the kids to Disneyland. It hasn’t happened. The market knows this. clients that were going to buy a new car in the last 18 months not many of them have because they’ve said “Michael what for we’re in lockdown? We may as well wait”.
A new model will come around. supply has been in question. The market knows this. People are getting frustrated. People are getting more and more annoyed with lockdowns people are going to get out and spend money there will be a very, very high demand for goods and services. And businesses will be very, very busy. I believe over the next few years keeping up with the demand.
We’ve had no immigration in Australia pretty much for a month now we’ve got a pretty tight immigration regime. We need to get back on track get these people in. They get to buy houses, build houses, buy cars, they need furniture, electronics, fridges, air conditioners, and so on. The market knows this now, this is my opinion as to why growth markets are still so high at record highs. In fact, not withstanding the global pandemic.
The alternative interest rates are so low. There are some places around the world in Europe like Denmark, where they’re paying people interest to borrow money. Balanced funds have retained excellent averages. Over the last 10 years most balanced funds are returning anywhere from six and a half eight up to 9% averages on some.
Over the last 10 years. The last 12 months balanced funds have delivered the second-best performance that we’ve seen in the last 20 years and that’s during a global pandemic.
Our message to our clients is clear. We invest your money we design financial plans with your long term and short-term goals and objectives in mind. You stick to the course we maximize your diversification using everything in our power. You are well placed not only to enjoy these current high levels, but to cope with those short-term periods of fluctuation and volatility that undoubtedly will come around.
We hope you’ve enjoyed this feel free to contact our office anytime.
Have a great day.