Invest
Investors have nothing to fear but fear itself
In a low-interest, high-volatility environment, investors are feeling more anxious than ever but this may be a self-perpetuating cycle, according to economists.
Investors have nothing to fear but fear itself
In a low-interest, high-volatility environment, investors are feeling more anxious than ever but this may be a self-perpetuating cycle, according to economists.
While there are some legitimate concerns, the digital age’s bombardment of information on investors may be doing more harm than good, says AMP chief economist Shane Oliver.
“The nominal return potential from most asset classes are lower than they used to be. Global growth is slower than it was pre-GFC and the world seems awash in geopolitical risks,” Mr Oliver said.
“A concern is that the combination of a massive ramp up in information combined with our natural inclination to zoom in on negative news is making us worse investors – more fearful, more jittery and more short-term focused,” he explained.
It’s become an enduring trend in markets, with Principal Global Investors chief economist Bob Baur saying that fear is only having a negative effect on economic growth.
“The ongoing emotional and financial trauma of the last eight years has made fear of relapse the habitual reaction to even normal risks that arise from time to time. But, negative feedback from habitual fear is part of the reason why current growth is so slow,” Mr Baur said.
This has had a visible effect, encouraging short-termism among both investors and companies.
“In the current environment, markets reward companies that return cash to shareholders through stock buybacks or dividends. This prompts managers to delay capital spending and look for short duration projects, mergers and acquisitions. Less investment means slow economic and productivity growth,” Mr Baur said.
Coupled with interest rates at historic lows in Australia, these concerns can often worsen the market factors they stem from.
“Super low interest rates have raised the cost of retirement. Households worry about not having enough money, so savings rates go up, spending growth slows, consumption is delayed and economic growth slips even more,” Mr Baur said.
However, despite this, there may be light at the end of the tunnel, with some long-anticipated factors likely to allow investors to breathe a collective sigh of relief.
“Can the negative feedback loop be broken? Yes, [with] time, a rate hike and faster wage growth. There’s been enough time already and the other two are coming,” Mr Baur said.
“The Conference Board’s measure of the ease of finding a job is the highest since August 2007, suggesting robust wage growth ahead. Job openings are solid and payroll gains are strong.”
Property
A generation of Aussies could be locked out of the housing market as prices boom
A booming property market is set to see a generation of younger Australians priced out of the market, a shadow assistant minister has said, challenging the narrative that younger people are failing...Read more
Property
Is the property market reaching its summit?
While home values continued to rise across the country in April, current trends are pointing to the possibility that the property market has peaked, a new report has revealed. ...Read more
Property
Wait, so it’s definitely cheaper to rent than buy?
New research has revealed that there are indeed dwellings in Australia that are cheaper to buy than rent (57 per cent to be exact), but where are these dwellings located and are they liveable? ...Read more
Property
‘List your homes before the good times run out’
Aussies who had planned to sell their house prior to the pandemic are being urged to realise those plans now, with buyers said to be immensely hungry for housing. ...Read more
Property
National house prices break 18-year record
Building on the post-pandemic recovery trend, national house prices saw the steepest quarterly increase in almost 18 years, with a majority of the capital cities witnessing record price gains. ...Read more
Property
Rents grow at fastest pace since 2007
Housing rents are rising at the fastest pace since 2007, but experts are warning that rental conditions around the country are extremely diverse. ...Read more
Property
It is now more expensive to rent in the Gold Coast than Sydney: Domain
A spike in consumer lifestyle demand means it is now more expensive to rent on the Gold Coast than in Sydney, a new industry report has revealed. ...Read more
Property
Has the property market reached its peak?
Australian property has shown exceptional strength as it rebounds post-pandemic, with the national growth rate in March beating a 33-year record. However, some experts believe it’s all downhill from...Read more
Has the property market reached its peak; Biden’s climate summit and our sharemarket, and the upcoming budget
Listen now
Is the market overheating; should ETFs take your fancy, and what’s happening to the low and middle income tax offset?
Listen now
Home values up 30% (or are they); NFTs taking the world by storm, and why Keating thinks Aussies will be ‘poor’ in retirement
Listen now
Raging floods, the tech stock bubble and the ongoing SG debate
Listen now
Property
A generation of Aussies could be locked out of the housing market as prices boom
A booming property market is set to see a generation of younger Australians priced out of the market, a shadow assistant minister has said, challenging the narrative that younger people are failing...Read more
Property
Is the property market reaching its summit?
While home values continued to rise across the country in April, current trends are pointing to the possibility that the property market has peaked, a new report has revealed. ...Read more
Property
Wait, so it’s definitely cheaper to rent than buy?
New research has revealed that there are indeed dwellings in Australia that are cheaper to buy than rent (57 per cent to be exact), but where are these dwellings located and are they liveable? ...Read more
Property
‘List your homes before the good times run out’
Aussies who had planned to sell their house prior to the pandemic are being urged to realise those plans now, with buyers said to be immensely hungry for housing. ...Read more
Property
National house prices break 18-year record
Building on the post-pandemic recovery trend, national house prices saw the steepest quarterly increase in almost 18 years, with a majority of the capital cities witnessing record price gains. ...Read more
Property
Rents grow at fastest pace since 2007
Housing rents are rising at the fastest pace since 2007, but experts are warning that rental conditions around the country are extremely diverse. ...Read more
Property
It is now more expensive to rent in the Gold Coast than Sydney: Domain
A spike in consumer lifestyle demand means it is now more expensive to rent on the Gold Coast than in Sydney, a new industry report has revealed. ...Read more
Property
Has the property market reached its peak?
Australian property has shown exceptional strength as it rebounds post-pandemic, with the national growth rate in March beating a 33-year record. However, some experts believe it’s all downhill from...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
