What’s one thing that’s on the markets’ minds right now? And pretty much everyone else’s.
Go on, take a wild guess!
Yup, it’s inflation. The devil.
It’s consuming us all (and our money obvs) and markets are going wild because of it. Thanks to this nasty little bugger that’s growing by the day, the Fed and pretty much every other central bank (apart from Japan who probably wishes they could complain about inflation) is doing what they can to tackle this thing without sending the rest of us into a fate worse than 40-year-high inflation. Aka a deep recession.
So, they’re busy raising rates as aggressively as they possibly can till something breaks. Or looks like it is breaking. Then they’ll pivot (when: that’s the million $ question) and someone’ll be left to clear up the mess. Though don’t count your chickens just yet since we don’t know just how high rates will go and just how low they’ll come back down to! Don’t waste your energy wishing for 0.1% interest rates. I reckon that’s a thing of the perfect, pretty past.
Stop the news!
And right now markets look like they’re hanging by a thread and with every month, what feels like every day if I’m honest, comes more surprises. And of the nasty sort. Inflation doesn’t seem to be falling, not on aggregate anyway. Because while things like used car prices and petrol are starting to come down, inflation has kinda already seeped into every nook and cranny that it’s proving difficult to get rid of.
The real problemo lies in the fact that our economy (along with us lot) has gotten so used to low interest rates that we’re finding it really hard to adjust to this higher-rate reality. Though we’re half hoping this is all one big fat nightmare and we’ll wake up with our perfect low-rate paradise because this rate rising thing is throwing a massive spanner in the works. The UK’s pension system was the first to show signs of breakage. Who knows what – or who – will be next!
Then there’s China – a once-global powerhouse – who is now getting weaker by the day. Though mark my words, it’ll rise from the ashes. But for now, it’s dragging the whole economy down with it. Speaks for its power though, right?! The entire global economy is pretty much taking a break. It’s so worn out. From covid to high inflation to high rates, it’s getting a lil’ too much. There’s only so much the economy can handle. Until it starts to crack.
So thanks to super-low-but-super-sweet interest rates that came right after the mess of ‘08, we all took so much for granted. Like rising stocks! For no apparent reason other than the fact that the alternative (bonds & cash) was loads worse.
You might very well be feeling a sad cocktail of confusion, worry, annoyance, frustration, more confusion, uncertainty plus a dollop of hopelessness. Have I missed anything?
We’re living in the weirdest times, possibly ever. And the investment space is no different! So it’s normal to be feeling all that. And more.
The macro scene changes all the time. In 5 years there’ll be something else markets are grappling with!
But let me tell you this – which was told to me by a very smart and very successful fund manager – forget about the macro scene. It simply won’t matter by the time you want to access your investments which btw I hope is at least 5 years away! Psst: If it isn’t, you probably shouldn’t be investing.
All the macro scene does, sorry – all worrying about the macro scene does – is derail our precious investment plans and our futures along with it. Fretting about the macro scene, from inflation to interest rates and all the nastiness in between, will leave you feeling paralysed at best and at worst it’ll cause you to sell your investments. I mean who’d want to invest in such times let alone hold onto your stuff.
It ain’t gonna be easy if you’re trying to predict the future and stressing yourself out in the process as you come to the realisation that it’s pretty much impossible to predict such things. If someone can tell you with (almost) certainty of what’s to come, know they’re either a) lying or b) don’t know that they don’t know!
We have to take the bad with the good & not let opportunities go to waste
Bear markets and recessions are part and parcel of investing. They normally come around every 5-7 years or so. I’m afraid you can’t escape them! Though think of it as no pain no gain. We can’t have it good all the time. Much as we wish/hope otherwise. The economy ebbs and flows and low periods (like now) usually follow really high periods, or bull markets.
And bear markets come with their own set of non-fun macro happenings. Like the tightrope of recession and rates. Rate rates too high too soon and we risk a full-blown extra-nasty recession but not raising them sooner means that inflation gets to runaway on its own. Not an easy one. And not an easy investment period to navigate either.
But agonising over the macro scene is much like a rocking chair. It will give you something to do but nowhere to go. It’s pretty useless.
The news is full of the here and now. You’ll find no shortage there! And in fact, it’s during bear markets when wealth gets built because investors have a habit of overestimating the damage that will get done.
Bad news often gets discounted way more than it should. So just something for you to thing about!
It’s impossible to know with any real certainty what’s going to happen, let alone when. Instead, you should be focusing on what you can control which is how often you invest and more importantly, how long you’re invested for.
With that plus a huge helping of luck, you’ll be absolutely fine. In fact, more than fine.
So do what you can to ignore this loud, loud macro noise that doesn’t want to stop screaming. I know I’m trying, but it doesn’t help when you’re at the office seated beside a screen that bellows out financial news right as it’s happening!
Your superpower is being able to think in decades when the rest of the world is too busy thinking in days. Disclaimer: This blog is not investment or financial advice. It is my opinion only. This blog is not a personal recommendation to buy/sell any security, or to adopt any such investment strategy. Always do your own research before you commit to any investment.
Leave a Reply