28 May 2012
Economic and market commentators remain trapped in the confusion zone as developments around the world continue to confound the pundits. Today’s financial press run articles such as “Market recovery just around the corner” featuring comments by (no surprise here) a local stockbroker. Next to this is another article: “Australia won’t be spared in crisis” with commentary from an international bank economist. In all our years in the financial markets, we have never seen opinion more divided or uncertain. The reason for this is quite simple – there are several major developments around the world which will have significant effects on global (including Australian) markets and no-one knows what is going to happen next. Now it has always been the case that commentators aren’t fortune tellers, but in the past few have admitted to this. Now however it is painfully clear that no-one has much of a clue as to where the global political and economic gyrations are leading.
There are at least three major areas of uncertainty – all of which have considerable impact on our bond and share markets. Firstly will Greece leave the Euro and, if so, what will be the implications for the remaining Euro-zone? (For an interesting take on the options now facing Greece, see this article by Karen Maley in last Friday’s Business Spectator). Secondly, is the USA finally dragging itself out of it’s economic slump or will the still-depressed housing market continue as a brake on growth? Thirdly, is China’s growth slowing to a point where it will impact adversely on Australian exports and hence our economy?
The only certainty is that no-one can answer any of these questions with any confidence and hence the commentators are left to make it up as they go along. The one constant that does remain for investors is the need for diversification, simplicity, transparency, value for money and cost minimisation. Whites IFM is a lead proponent of these investment cornerstones – please contact us using the “Enquiries” section of this website for more information.