With so many moving parts playing out right now and doom and gloom reported everywhere, many people are feeling stressed and anxious about the future. And is it any wonder. We have the Russian invasion of Ukraine, supply and security issues with China, concerns about our energy supplies, the cost of fuel and food rising and the ongoing COVID pandemic and all of the related medical and financial implications.
Furthermore, just 6 months ago, the Reserve Bank was reassuring us that interest rates would be kept at historically low rates for a long time. However, with inflation rising quickly, we are now seeing interest rates needing to be raised quickly for the first in 30 years to combat this sharp rise in inflation.
The increase in rates (2 back-to-back no less) has caused angst among many that the US and Australia will be tipped into a recession. The fact that both markets fell dramatically this week is testament to that angst.
So, should we be worried about the headlines? The answer is that it’s all about putting things into perspective.
Headlines are there to generate attention, not just awareness. The key point to remember is that the timeframe is more important than headline. For example, while the US market is down 17% this year, it’s still up 42% in the last 5 years. And the Australian market fell 30% in the four months after COVID but went up 30% in the 4 months after that. While the Australian market fell 5% on Tuesday, good businesses are still profitable and paying dividends.
History tells us that this too shall pass. What we don’t know, however, is how long it will take. Nobody knows.
So rather than panic and focus on fear-inducing headlines and worrying about things out of our control, we should put things into perspective and focus on things that are in our control, like putting smart strategies in place to ride out the turbulent times.