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Hi, it’s Matt Hale, Director and Head of Financial Planning for Rising Tide here. Now, if you’re anything like me, you’ve probably noticed a lot more headlines around the share market and interest rates over the past few weeks. So we wanted to provide a couple of minute update to hopefully set your mind at ease or alternatively, evoke a conversation with either myself or your advisor.
Now, first and foremost, it is not a normal time. At no stage in history have we had three major things; inflation through the roof, the recovery from COVID where there’s been a lot of financial stimulus provided, and then also the Russia and Ukraine turmoil going on at the same time. But what is really normal is downturns in the market. Since 1980, it’s been on average every four to five years where there’s what we would call a bear market.
Now, a bear market means that from the peak to where it currently sits, it’s gone down by more than 20%. The most recent one was in March to June of 2020 when COVID first hit. Now, the good news is with these downturns is that they do turn back around.
As I said, it’s absolutely normal. But in the meantime, we often feel like we need to take action by doing things.
Now, what I’ve learned by doing this for over 15 years is that making changes and doing things isn’t always the right way to go about it. Sitting on your hands and sticking to your strategy is more often the best thing to do. If you’re not sure about what you should personally do, please reach out and we can connect you with your advisor or someone within our team to talk you through it a bit more.
Now I mentioned COVID during the start of the COVID the share market across the world dropped by more than 20%, which was extremely frightening. What we know is by the end of 2021, right before this crash, it had gone back up by over 35%. So it will bounce back. It’s just a matter of time. What we also know historically is that the really good days come randomly after the really bad days and that there are a lot of different assets that we’re not sure when they will pick up again. What I mean by that is it doesn’t mean because Australian and international shares are going down, that property will definitely increase. If anyone has a crystal ball, please let me know, but otherwise don’t listen too heavily to the predictions.
What we need to make sure when we’re going through these really big changes in this bear market is that you’re comfortable and that you can sleep at night and that you’ve got peace of mind that the strategies that you have in place fit what you’re trying to achieve. What I will say is if it is keeping you up at night, please let us know, but otherwise have trust that we will get in touch if we feel like there is something dramatically that needs to change. In the interim, do sit tight, but definitely reach out.
Now when it comes to interest rates, it’s been very heavily, uh, I suppose spoken about in the media that interest rates are rising.
The Reserve Bank has moved interest rates up twice in the last couple of months, and it feels like it’s a pretty blunt object to reduce inflation. What we know is that it’s very likely that the interest rates will continue to move up, but also the banks have already started to price those increases into their fixed rates. I would definitely recommend if you are coming out of a fixed rate very soon, or alternatively you’re on a current variable rate, to speak to one of our lending experts and they will be able to help you understand what your options are.
And for the people that are related to the financial planning and the lending side of things, let’s have a conversation between yourself, your financial planner, and also the lending team and we can work out what strategies might best fit your goals. As I said, not doing anything may be the best thing to do right now, but if you aren’t sure get in touch via the website and we’ll do our best to guide you in the right direction.
Off the back of this video, we will also include some information from one of our trusted partners Vanguard, from one of their head honchos in the investment space and someone who is much more au fait this than I am and that we’ll be able to provide you with some detail and some facts as well. Once again, reach out and we’ll do our best to make sure that you’re feeling okay and you’ve got peace of mind.