Each month we provide a wrap of the biggest issues in personal finance.
This month shares plunged in the face of increasing US interest rates and further fall out from the trade wars between the US & China. Property prices also continue to dominate headlines with no end to the recent slump in site. We also look at some surprising outcomes from a survey into bank trust.
October Sell Off
The ASX shed close to 9% in October entering a “technical correction” for the first time since early 2016. The slide this month has been driven by two major factors; the first is rising US interest rates. It may seem a bit odd that rising US interest rates are impacting Australian share prices but the fear from investors is that these rate rises will make borrowing more expensive for Australian companies in the future which means less money for shareholders. The rising rates also makes investing in debt (i.e bonds) more attractive vs. shares.
In addition to rising rates, fears of the impacts of the ongoing trade war between China and the US re-surfaced as the Chinese economy showed signs of weakness. This weakness is particularly harmful for Australia with over 30% of all our exports heading that way.
Property Not Doing Much Better
With shares pulling back it is logical to look elsewhere for investments but, unfortunately, property doesn’t seem to be doing all that much better with AMP downgrading their Sydney and Melbourne property forecasts to a 20% decline from peak to trough. The downgrades come as auction clearance rates continue to decline and credit remains harder to obtain.
It’s important to remember that both property and equity have their ups and their downs – the key is not to panic in the face of these corrections – as Warren Buffet says, “Be fearful when others are greedy and greedy when others are fearful.” Plenty can help you stay on course with your investments.
Trust & the Royal Commission
In light of all the scandals unearthed in the ongoing royal commission into financial services, it should be no surprise to anyone that a recent Deloitte survey found that only a quarter of respondents believed “banks in general” will keep their promises.
What is surprising however is that close to half trust their own banks to keep promises. This means that we are twice as likely to trust our own bank than their competitors. Recently we wrote a post on how being loyal to your bank is costing you close to $2,500 per year. This basically means that we should trust our own bank less than any others – particularly if we have been with them for a long time.
The information contained on this page is of a general nature and may not be appropriate for your personal circumstances. You should obtain personal financial advice before acting on this information.