Stability In Uncertain Times

You have no doubt heard over the last few weeks a lot media speculation about the state of the economy. We have read everything from ‘we are heading to a recession’, to another ‘financial crisis’ and even the ‘death of free markets’. Rather than focus on the opinions of some, lets look at some facts.

What We Know

There are a few things we know through the economic data we receive;

• Unemployment is just over 5% and has been for a few months. This is a far cry from the 10% unemployment of the last recession.
• GDP for the last quarter was 0.4%, up on the 0.2% & 0.3% of the previous two quarters. Two consecutive quarters on negative growth constitutes a recession, and we haven’t even had one.
• Inflation average for the 12 months to June is 1.6%, average wage growth is 2.3% for the same period. Australians on average are still getting slightly ahead.
• New dwelling approvals have decrease 20% in the 12 months to June. This is an indicator of consumer sentiment.

Not all of our information is data related. We also know some non-data related economic factors such as;

• The trade war between the United States of America and China. As two of our biggest economic partners, this has real implications on our economy and markets.
• The broader international economy is experiencing a period of slow economic growth, with multiple countries at very low, or even negative interest rates.
• Britex drama and the instability in Europe.

From looking at this information we know, we can ascertain that things are definitely slow at the moment, but are they as bad as the media makes out?

What We Don’t Know

There are plenty of things that we don’t know;

• What the outcome of the trade war will be.
• Whether the England will be able to agree on a Britex deal.
• What action Governments may take to stimulate growth.
• How investors will react to information as it hits the market.
• What the financial and stock markets will do.

We can take action on the real data we receive to try and reverse this slowing trend and stimulate some growth in our economy.

What we shouldn’t always act on, but too often do, is what we don’t know. This is just speculating on what is going to happen, which is the main cause of panic, and the media plays a large part in this. Media is a business, and they need people reading there content in order to maximise advertising revenue, and profit. They are in the selling game; selling you content, ideas, information and opinion.

A car companies will exaggerate how great their product is, because good products sell. Pharmaceutical companies will exaggerate how effective their drugs are, because desirable results sell. And unfortunately, the media will exaggerate how bad things are, because bad news sells.

What To Do

The current data available suggests things aren’t quite as bad as the media will have you believe, but we cannot predict the future. Economic conditions can deteriorate or improve, depending on how investors and consumers react to the current climate. There are a couple of things you can do however, to help give you the best chance in riding out these economic troughs;

• Seek professional advice. As discussed above, using the media reports as a basis for your decision making is fraught with danger. Predicting a crash is easy, and it is great click bait. A good financial planner will consider the prospects of a downturn when building a strategy and have some contingencies and protections in place. Situations such as these is what they are put in there for, so trust the process and the strategy. There is no point having a strategy with some downturn protections if you change everything when a downturn arrives.
• Take the long term view. Trying to predict the markets and time your investments or sell outs simply does not work over the long run. Historical investment data will show that buying and holding for a long period of time will ultimately reap the biggest returns.

If you have any question or concerns about how the current economic climate is effecting you, give the team at Steve May Financial Services a call and start a conversation today.