The media (TV, radio and newspapers) will always deliver the bad news. But there is plenty of good news out there for investors.
The global financial crisis (GFC) was big news - we haven't seen the like since the Great Depression. While it's reasonable to expect a high volume of commentary on the GFC, media reports (because of their doom and gloom nature) have tended to focus only on the bad news.
This continual negative reporting has had a powerful impact on the individual's psychology and the collective psychology of the economic community, not to mention investors.
Bad news becomes a conversation starter - everybody knows somebody who has lost their business or job. People start to worry and stop spending - just in case it happens to them. The media continues to tout its bad news and good news ceases to exist.
How the media works
Let's stop and think about media reporting. It's all about the here and now. And if the news had an equal mix of bad news and good, it simply wouldn't have the same impact.
It's short-sighted because it doesn't consider how things are likely to change in the future. It doesn't say 'things are really bad, but...' it just tells us 'things are really bad.'
As investors, we need to filter out all the bad short-term news and shift our focus to the long term where the future looks somewhat brighter.
And now for the good news
Interest rates are at 50 year lows. Fuel prices have fallen from last year's highs. Unemployment and inflation are still within reasonable limits. Business opportunities abound. The talent pool to recruit from has improved, which means employers can choose the best fit for their businesses. Employees are more focused on job security which is also good for employers, as it means lower staff turnover. Suppliers are offering lower prices, better terms and value-added offerings.
There have also been some good news from the US financial sector, in particular, the US Administration's plan to remove 'toxic' assets from the balance sheets of US financial institutions. This may help relieve the global credit squeeze and allow banks to start lending again.
Although March 2009 saw the Australian sharemarket plummet to a low of 3120.80, it's since rallied strongly. It has rebounded 26.7% to 3954.90 as at the end of June 2009. There may still be some uncertainty in investment markets, but we consider that the worst may be over.
Don't wait for the economic recovery
Media reports may indicate that the Australian economy may still not be in good shape and we're experiencing a recession; but historically, investment markets have tended to recover well ahead of the economy. That's because investment markets are forward-looking; they anticipate better growth in earnings and then economies follow. The sharemarket is a leading indicator and the economy is a lagging indicator of economic recovery. If you rely solely on economic recovery to guide your investment decisions you may miss the boat. Speak to one of the financial advisors at Intellichoice about which investments may potentially help you grow your wealth in the safest way possible.
