With many commentators, be they financial journalists, investment managers or perhaps those around the Sunday barbeque predicting the next big thing… ‘will it be lithium to create batteries for EVs, biotech or ESG investing for social good or the return of small cap companies’… it may be time to reflect on where we are in the cycle of things, as the next big thing could well be a return to normal!
Not the ‘new-normal’ of the past two years nor that of the past decade, but the long-term normal where interest rates are not close to zero, inflation doesn’t exist or is very low and where companies fuelled by low or zero cost debt, can see their stock prices rise rapidly, with new and seasoned investors alike jumping on-board for fear of missing out.
In planning to write this article I recalled a quote from Jeff Bezos, founder and executive chairman of Amazon, in response to a question he says he is frequently asked regarding the Amazon retail business ‘What’s going to change in the next 10 years?’ His reply, ‘I almost never get the question: What’s not going to change in the next 10 years?’ and in turn he says he believes that in 10 years, Amazon’s customers will still want low prices, speedy delivery and a vast range of merchandise from which to choose; Amazon, just needs to continue to deliver.
So, in applying this thought to a return to normal, for those that may not have seen a couple of investment and economic cycles or may have forgotten that they exist, let’s have a look at what has not changed as we step into a dramatically different phase for global and domestic economies.
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Disclaimer: The information contained in this document is provided for educational purposes only, is general in nature and is prepared without taking into account particular objective, financial circumstances, legal and tax issues and needs. The information provided in this article is not a substitute for legal, tax and financial product advice. Before making any decision based on this information, you should assess its relevance to your individual circumstances. While SMSF Association believes that the information provided in this article is accurate, no warranty is given as to its accuracy and persons who rely on this information do so at their own risk. The information provided in this bulletin is not considered financial product advice for the purposes of the Corporations Act 2001.
Ian Irvine - Guest Contributor
Ian has been a keen investor for over 40 years and can draw on his experiences from both investing on his own behalf and also having worked in financial services for more than 30 years. Over this time, he has seen many changes that impact investors’ attitudes to in what and how they invest.
He started his career in what is now referred to as fast moving consumer goods (FMCG) or grocery, working for an Australian margarine manufacturer. In 1986, he was recruited to Westpac around the time of deregulation of the sector, where he spent 10 years before taking a role at AMP and then with ASX for 14 years up to the end of 2017. He continues to be involved with ASX; working on their educational programs.
In 1996, he and his wife established their own SMSF and again the experience and lessons learned regarding managing an SMSF over the years have provided him with many insights and ideas. He enjoys sharing these with others where these are helpful and always suggest that if an investor or SMSF trustee is unsure, that they should seek appropriate advice from a licenced professional.
Ian holds a B. Com (UNSW), and lives in Sydney and enjoys travelling to and meeting investors and SMSF trustee at the educational events with which he has involvement with from time to time.