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Keeping you in the loop – Happy EOFY!- June 2022

Congratulations on making it through another financial year. I can’t believe that we are already halfway through 2022. How quickly the days go by…


Nearly everywhere you turn, from friends and colleagues to news channels, you can find someone with a strong opinion about the financial markets.  At the moment, it seems that the news on so many fronts is bad with skyrocketing energy costs and both equity and bond markets down significantly since the start of the calendar year. While investing in the stock market is typically a prudent choice for investors seeking long-term growth, sharp drops can still be hard to stomach. Below are some things to keep in mind if a market tumble makes you feel the need to “do something” which might shut you out of the strong recoveries that have historically followed market downturns. Downturns aren’t rare events Typical investors, in all markets, will endure many of them during their lifetime.
There has been a lot of focus on the transition to a bear market (with the line in the sand of a 20% decline having been triggered by the US S&P 500 index in mid June 2022).  This is the same market that delivered returns of 36% for the year ended December 2021, and even with a 20% decline at the onset of the Covid pandemic, recorded 7.3% for the year ended December 2020.  It is important to keep in context that in spite of several bear markets, the market has also continued to trend higher over the long term. Not all financial market declines are the same in length or severity.  For example, historically speaking, the GFC of 2008-2009 was an extreme anomaly. As challenging as that event was, it was followed by one the longest stock market recoveries in history.
The Australian equity market (which admittedly recorded a more modest, but still very respectable 17.5% for the year ended December 2021), has held up relatively well, posting a decline of 11% (so not yet in bear territory).   Dramatic market losses can sting, but it’s important to keep a long-term perspective and stay invested in order to participate in the recoveries that typically follow­. Some bear markets since 1980 have been sharp, but many bull market surges have been even more dramatic, and often longer, leaving stock investors well compensated over the long term for the risk they took on.  But such action would shut you out of the strong recoveries that have historically followed market downturns. The answer is to come up with a game plan before the next market pullback so you’re well positioned to try to take advantage of the opportunities that follow. What’s more, you’ll probably know what to expect as markets cycle through their phases, so you can tune out messages that don’t help your strategy.
Notes: 1 The latest bull run is still ongoing. The calculations represent the price increase and period up to 30 June 2021.  Calculations are based on the S&P All Ordinaries Index for the periods 1/1/1980 to 30/6/2021. A bear market is defined as a price decrease of more that 20%.  A bull market is defined as a price increase of more than 20%. The plotted areas depict the losses/gains ranging from the minimum following a 20% loss to the respective maximum following a 20% appreciation in the underlying index. Calculations based on monthly data.  Logarithmic scales are used for this illustration.  All distributions are reinvested.Source: Morningstar Data and Vanguard

Final Say:

Please don’t hesitate to contact me should you have any questions, require assistance, or want to discuss any of the above in more detail. Please give me a call on 1300 HH WLTH (1300 449 584)

General Advice Warning

The information in this article and the topics and strategies discussed are of a general nature. It does not take your specific needs or circumstances into consideration, so you should look at your own financial position, objectives and requirements and seek financial advice before making any financial decisions.

If you are seeking financial planning services like ethical investing, retirement planning, to wealth management in Brisbane, book your consultation with us and see how we can help grow your wealth in more ways than one.

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CB Wealth Australian Pty Ltd T/As HH Wealth is a Corporate Authorised Representative (No. 1283595) of Axies Pty Ltd ABN 38 136 704 446 AFSL No 339 384. Chris Holme is an Authorised Representative (No. 1004793) of Axies Pty Ltd ABN 38 136 704 446 AFSL No 339384.

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