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Pink diamonds: Navigating the Investment Market Maelstrom

Investors could be forgiven for being a little exhausted from the on-going investment market turbulence over the course of 2019.  One moment, we have miners and the banks leading the market with higher stock prices, the next its consumer staples, followed by fintechs (think Ezypay, Coinjar and Afterpay for example). 

Determining future market trends is like trying to predict which way a whirling dervish is going to face at the end of a hypnotic dance routine. In fact, the words of the famous Blancmange 80’s pop hit, Living on the Ceiling come to mind:

You keep me running round and round, 
Well that’s alright with me,
Up and down, I’m up the wall,
I’m up the bloody tree.
That’s alright with me,

Of course, it’s easy to forget amongst all of the market gyrations, that the ASX 200 has increased 1065 points or 19.16% since the beginning of 2019.  The chart below will help put the overall trend into perspective.

Navigating the Investment  Market Maelstrom -

 (Source: ASX.com.au)

If we want to take a longer-term view of the overall Australian Stock Market (All Ordinaries Index), say from 1860 until 2019 (see the following chart), the market has posted positive returns far more often than it has posted negative ones.  In fact, 96 positive years (81%) versus 23 negative ones (19%) since 1900.

Navigating the Investment  Market Maelstrom -

(Source: IBIS World)

But, I hear you say I’m not interested in the last 150 years! 

So, lets simplify things and take a look at the rates of return on $10,000 invested wisely in Australian shares in 1989 (assuming all dividends are reinvested, no transaction costs or taxes). 

This would have grown to $146,337 in 2019.  If you chose US shares you would have done better ($186,551) and even for those highly risk averse folks amongst us, Aussie bonds have done quite well too ($105,787). 

Navigating the Investment  Market Maelstrom -

 (Source: Canstar and Vanguard research)

In recent history, record low cash rates around the world have spurred investors to pump more capital into share, property and bond markets.  If the experience of the rest of the world is anything to go by (note Japan etc) low interest rates do not spur economic recovery. 

Philip Lowe, Governor of the RBA has flagged his concerns about continuing down this path in Australia.  In the last week, he has asked the government to increase infrastructure spending as a way of off-setting declining GDP growth.

Afterall, Philip knows that he only has one lever to use on the economy and that is interest rates and they haven’t been working!  He is concerned about many things including a sliding GDP per capita and stagnant wages growth to name a few. Since 2014, amongst OECD countries Australia’s annual GDP growth rate has slipped from 6th to 17th.(see chart below)

Navigating the Investment  Market Maelstrom -

(Source: Trading Economics)

So, how does the average investor ride out the stormy weather?  With interest rates at all-time lows property is attractive, but manufacturing growth is tricky and you must do your research. 

The old days of set and forget are probably gone, although our unsustainable immigration rate may fuel a “mini-boom”.  The share market’s roller coaster puts many investors off too.

Perhaps then, it’s time to take a serious look at Argyle pink diamonds.  A proven track record of impressive, consistent returns across all categories may just be the sheltered investment “port” that you are looking for.  And of course, Argyle Diamond Investments are the experts to help you navigate a course that will help you arrive at your investment decision.

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