I’ve just arrived home from a family holiday.
As I opened my front door, I quickly realised I’d brought home a souvenir from Bali: bacteria.
Yes, I’m typing this bent over with a bad case of ‘Bali belly’. Yet nothing bad ever happens to a columnist, so I’m using my tummy troubles as an analogy for how the world financial markets are feeling right now:
And worried about what’s coming down the err … pipes.
Case in point, here are the headlines that greeted my arrival back into the country:
“House prices to fall 15%: Morgan Stanley”
“ASX plunges ‒ $50 billion bloodbath”
Pass the bucket!
However, I view these headlines as about as reliable as consulting Dr Google about my tummy troubles:
“Bloating? Cramps? Vomiting? You could have stomach cancer! And possibly rabies!”
So what is really going on with investment markets, and, more importantly, what should you do about it?
Well, at long last the markets have started paying attention to the fact that global interest rates are on the rise.
Yet this shouldn’t come as a surprise to my regular readers … I’ve been banging on about it for years.
In fact, way back in 2015 I wrote an article entitled “2018, The Year First Home Owners Get their Revenge”, in which I urged young people to start aggressively saving up for a 20% deposit so they’ll be prepared to take advantage of lower house prices.
And for people approaching retirement I’ve long advised to save up a buffer of two to three years of living expenses in cash (less any government pension payments) in their super, so they aren’t forced to sell when the real crash comes.
That’s the real rib-tickler: for all the doom and gloom headlines this week, global interest rates are still incredibly low, and they’ve only just begun rising. In my tummy analogy, what we’re experiencing is merely an uncomfortable rumbling.
Yet the truth is that we Aussies, by taking on record household debt at a time when interest rates are at record lows, have already swallowed the bug. As a result, plenty of overstretched people may well find their financial lives will end up in the toilet sometime in the next decade.
The most important thing to take out of this week is to ask yourself: am I prepared?
Trust your gut.
Tread Your Own Path!