The Best Performing Developed Economy is Not Producing the Best Returns

The Economist recently declared Australia to be the most successful developed economy, citing our 27 years without a recession, rising incomes, low public debt and affordable social safety net as the envy of the world. In the years since our last recession, the Australian economy has enjoyed 3 times the cumulative growth of Germany, median incomes have risen 4 times as fast as the US and at 41% of GDP, our public debt is less than half that of the UK.

So the Australian share market must have been the best performer over the last 27 years as a result, right? Well as many of you know it’s been a long time since the Australian share market has been the best performing asset class and points to the perennial disconnect between economic fundamentals and short-term market performance. The distinction is important when looking at the sell-off in global equity markets in recent weeks.

Concerns about trade wars, political instability, rising US interest rates and their impact on emerging markets and unrealistic technology company valuations have been on the minds of investors for months. We believe that it is investor psycology more than economic fundamentals which have tipped markets into the current correction. Rather than attempting to predict the unpredictable, we focus our energies on ensuring that you have the most effective plan for eaching your long term goals. Robust diversification and ample liquidity are the best tools to ensure that you are able to face market volatility with equinimity.

We will continue to keep you informed as markets move, but more importantly we will continue to keep you on track.

As always, please feel free to call if you have any queries and we look forward to touching base soon.