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
How will border closures impact the property market?
Despite falling migration levels, property prices might not be impacted as much as investors think, an industry expert has explained. ...Read more
Property
Sydney, Brisbane, Melbourne tipped to surge: Westpac
One of Australia’s largest banks is forecasting strong growth in the housing market as low interest rates and availability of credit pushes prices up, despite the country being in its first recessio...Read more
Property
Is now the right time to make a tree or sea change?
The experience of isolating in our homes and suburbs has made many people reconsider what they actually value in a home, writes David Hancock. ...Read more
Property
Hot Property: Biggest headlines this week
Victoria’s COVID-19 restrictions have begun to lift as the rest of the country watches on: Here are the biggest property stories from this week. ...Read more
Property
Post-pandemic hotspots revealed
With investors eyeing investment opportunities, which hotspots are set to benefit? ...Read more
Property
Houses fall by nearly $100bn
The COVID-19 pandemic has seen a correction in the housing market, with capital cities falling by $98 billion in total value, official figures have shown. ...Read more
Property
Could changing tax law boost regional property prices?
Property investors are urging the Australian government to change tax deductions for travel expenses related to their investment property as a way to stimulate the regional housing market. ...Read more
Property
The importance of statistical weighting in property data
Investors are being urged to deep dive into the data, with statistical weighting likely to show property nationally has fallen despite many regions still performing strongly, according to research. ...Read more
Property
How will border closures impact the property market?
Despite falling migration levels, property prices might not be impacted as much as investors think, an industry expert has explained. ...Read more
Property
Sydney, Brisbane, Melbourne tipped to surge: Westpac
One of Australia’s largest banks is forecasting strong growth in the housing market as low interest rates and availability of credit pushes prices up, despite the country being in its first recessio...Read more
Property
Is now the right time to make a tree or sea change?
The experience of isolating in our homes and suburbs has made many people reconsider what they actually value in a home, writes David Hancock. ...Read more
Property
Hot Property: Biggest headlines this week
Victoria’s COVID-19 restrictions have begun to lift as the rest of the country watches on: Here are the biggest property stories from this week. ...Read more
Property
Post-pandemic hotspots revealed
With investors eyeing investment opportunities, which hotspots are set to benefit? ...Read more
Property
Houses fall by nearly $100bn
The COVID-19 pandemic has seen a correction in the housing market, with capital cities falling by $98 billion in total value, official figures have shown. ...Read more
Property
Could changing tax law boost regional property prices?
Property investors are urging the Australian government to change tax deductions for travel expenses related to their investment property as a way to stimulate the regional housing market. ...Read more
Property
The importance of statistical weighting in property data
Investors are being urged to deep dive into the data, with statistical weighting likely to show property nationally has fallen despite many regions still performing strongly, according to research. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
