The Expat Investor Podcast - Ep 1

Episode Description

We will look at how the global stock market has performed recently and why it can pay to ignore what is reported in the press.

Transcript

Hello and welcome to the first podcast of the Expat Investor. My name’s Jonathon Curtis and in this series I’ll be looking at all things investing for those living outside their home country, to help you make the most of your wealth. Together we’ll look at markets, current financial affairs, how different types of investments work, how to build a portfolio that’s right for you and how to avoid common investing mistakes. I’ll also debunk some investing myths, cut through the noise from the media and tell you what really matters to your investments and what doesn’t. In short, help you to become a better investor.

So without further ado let’s kick off. In this first episode we’re going to look at how the global stock market has performed recently and why it can pay, often handsomely, to largely ignore what’s being reported in the financial press.

Before we do though, let’s remind ourselves what’s going on in the world and the economy right now, which I’m sure most of you will be all too familiar with. So first off, inflation is running at a 40-year high and has lead to a cost-of-living crisis for many. In response, central banks around the world have been putting up interest rates at record speed, and there are more expected in the coming months, with the US Federal Reserve, European Central Bank and Bank of England all widely expected to hike rates another half a percent in September. As a result of the response to the covid pandemic, government debt has soared to levels not seen since World War 2. Many countries are teetering on the edge of recession, and to use the generally regarded definition of recession as two quarters of declining GDP, the USA is officially already there. The terrible conflict in the Ukraine is now six months in and shows little sign of letting up, and that’s continuing to disrupt global food and energy supplies. So all in all, there’s a lot to make people worried, and investors are no exception to that.

So you might expect then, that it’s a terrible time to invest at the moment. Now of course no-one knows the what the markets will do from here, but in the midst of all the negative headlines, all the gloom and doom, markets don’t seem to have paid much attention in recent months. That’s because over the past two months, the global stock market has risen around 14%. To put that into perspective, its average annual return is about 8 to 10 percent, so a 14% rise in the space of just 2 months is really significant.

Now admittedly, the global stock and bond markets have certainly given investors a rough ride for most of the year. In fact the bond market had one its worst starts to a year ever. And one point the global stock market had declined over 20%, which put it into so-called bear market territory. That put a lot of people off investing for the time-being, and the negative headlines kept them out. Yet despite the economy not really making a turn for the better, markets have shot up and are very nearly back to where they were at the start of the year.

You might this is a bit of a freak occurrence, but this isn’t a one-off – far from it. Let me give you a recent example. In February and March of 2020 we had the so-called covid crash, when the global stock market fell at breakneck speed as lockdowns took hold around the world. Yet while lockdowns continued and were bringing economies to their knees the stock market had recovered by August of the same year and kept on going up. 2009 was a similar story. That was then the worst year for the global economy since world war 2 as it was still reeling from the fallout of the financial crisis and many were still fearing the collapse of the entire global financial system. Yet in 2009 the global stock market rose around 20%.

We could go back further and find more and more instances of markets rising in the face of recessions, wars, sky high inflation, and so on.

So what’s the point of me telling you this? The point is that markets certainly are impacted by what happens in the economy, but they don’t go in lockstep. You see, inflation figures, GDP, employment numbers and so on tell you what’s happened over the previous few months, i.e. in the past. Markets though look forwards. They represent what investors collectively think will happen in the future. And that’s why you’ll often see them rise and fall well before economies make their move. So, if you’re basing your investment decisions, or even whether to invest in the first place, on current headlines and what’s going on right now in the economy, you’re probably not just one step behind but several steps.

Now last time I checked, there was no crystal ball of any reliability available, so we can never exactly know what’s going to happen to markets or the economy. And much as I’d absolutely love to be able to tell you whether the recent market rallies are the start of some bigger recovery or just a false dawn, we simply don’t know, nor does anyone, and if they claim to know that person quite frankly  needs a great big dose of humility. I’ve lost count of the number of times I’ve heard forecasts that have turned out to be completely wrong, and that applies to seasoned, professional investors as well.

What we do know, however, is that in the long run markets have shown their resilience in the face of whatever’s thrown at them. They do of course go down, gut-wrenchingly at times, but fortunately for investors they go up more often that they go down and rise further than they fall. We also know investing in the stock market has been one of the best ways to grow your wealth over the long term, although it’s also volatile so it isn’t for everyone.

But the big takeaway from this is while you certainly shouldn’t completely ignore economic goings on, don’t rely on them for knowing when to invest or what to invest in, as you could, as has happened, not just recently, but throughout history, miss out on large, rapid and completely unannounced gains. It’s not like there’s a bell that rings when markets are about to go up.

So try to tune out of all the negative headlines, and don’t try to guess where you think the economy is headed, because the markets are likely to have already factored this in – probably well before you do – and simply get invested. And if you already are, stay disciplined, don’t let headlines worry you and stay invested. The markets tend to handsomely reward those that do.

So that’s all for today. I hope that gave you food for thought. Thanks for listening and I’ll see you for the next episode of the Expat Investor, where we’ll explore why you should look beyond the markets of your home country, or the country you’re living in now, and invest in all parts of the world. See you then.

Thanks for listening, goodbye.

Podcast Overview

In this series, Skybound Wealth's Head of Investments Jonathon Curtis looks at all things investing for those living outside their home country and to help you make the most of your wealth.

Jonathon cuts through the media noise to discuss topics such as: Market performance, current financial affairs, how different types of investments work, The importance of building the right portfolio, how to avoid common investing mistakes, and tell you what really matters to help you become a better investor.