Create the life you want
It’s hard to believe we are nearly halfway through 2022 already. What an extraordinary year it has been so far. With the ongoing recovery from COVID19, a war in Europe, ongoing lock downs in China, floods, fires, heighten geopolitical tensions globally plus increasing concerns regarding the financial impacts of demand driven inflation – there hasn’t been much space for positive news!
While this newsletter is slightly longer than usual, given the environment we are experiencing we thought it was timely to provide this level of information.
As you will have read in our earlier newsletters, it’s in times like these where it’s important to keep your long-term perspective and not get entangled in negatively. We know markets move in cycles and that a strategy of quality investments provide above average returns over time.
Rest assured that as a Chrysalis client we continue to monitor and manage your portfolio to the prevailing conditions, and importantly, that your investments continue to be managed by selected high-quality and well considered fund managers.
Winter hits the markets
As we shiver through an icy June and the ski fields open early with unseasonably early dumps of snow, world markets are also moving into their own ‘winter season’.
You would have seen that the Reserve Bank is setting a course for higher interest rates in the coming period. We have had record low interest rates for over a decade and it was only a matter of time before they began to rise again. Higher inflation has been the driver of the increase thanks to COVID supply chain interruptions, the Russian/Ukraine war impact as well as ongoing lockdowns across China. All of this has meant that Central Banks have had little choice but to increase rates from their record lows to slow inflation and its damaging impacts on people‘s cost of living.
Make no mistake, increasing interest rates will slow inflation at some stage. However, the main concern is now whether Central Banks will raise rates too quickly and cause a recession. In financial terms a recession is defined as “two consecutive quarters of negative growth”, which in practice means the growth of the economy slowing. While this generally signals a broad slowing of the economy, the impact will be different depending on your circumstances – not all of this is Armageddon as the media likes to promote.
Higher interest rates will eat into people’s disposable income where they hold debt. However, on the flipside, it will add additional income to those holding savings. This is good news for debt-free self-funded retirees. As such, the Albanese government, Treasury and the RBA have a balancing act to manage between wage growth, strong employment, cost of living and Global economic factors. In short, stimulating the economy to grow while using interest rates to cool any unwanted inflation, but not too much that the economy slows into a recession. It’s a tough road ahead to navigate!
Watching the mainstream media, it is natural to be concerned when seeing persistent headlines like “Market bloodbath!”, “Billions of dollars lost!!”. While it is important to keep informed and aware of what is going on, it’s also important to understand the drivers behind many of these headlines. A significant portion of a media company’s profit is provided by selling advertising, with its ultimate success driven by the number of people that view the advertising space. This leads to the use of catastrophic and highly dramatic language used in both headlines and reports, as they aim to stand out in a crowded marketplace and capture our attention away from a competitor’s platform. The result being heightened levels of stress and worry among the population that is neither in proportion to the issue at hand nor helpful to our circumstances – it does sell papers though!
It’s vital in these times to remain focused on your long-term objectives. As history has repeatedly shown us over time, while in the short-term all things are possible, over the longer-term markets are cyclical, they correct, they grow, as is the fundamental nature of capitalism. Context is key.
These falling values in asset prices do create some psychological pain for all of us as we love to see account balances always going up. But nothing always goes up, and real wealth is built during these times of market falls when your expert fund managers can buy quality assets at discounted prices and set you up for success as the markets recover on the other side of a market correction which is currently underway. The informed investor sees this as a potential buying time, not a selling time, acquiring quality assets at discounted prices that set up the portfolio for success as the markets recover on the other side of a market correction. This is positioning that fund managers within your portfolio are currently undertaking.
We are going through a cycle rotation right now and this is going to be a period of downward trending markets as they revalue and respond to actions taken by central governments around the world. We are quite optimistic about the opportunities that currently exist with undervalued quality assets. We are trusting the expertise of your fund managers to take full advantage of opportunities for you, and we will keep you updated and informed as the year progresses.
That said, if you are drawing a pension and your circumstance allow, this is a good time to consider reducing the amount of pension you are drawing to preserve capital for a time while investments are devalued. If you would like to discuss this option, please speak with your adviser.
New Chrysalis Business Partner
Some great news! It is with great pleasure that we welcome Mark McShane as a new partner and co-owner of Chrysalis. Mark has been in the financial services industry for over 20 years and has been an integral part of the advice team at Chrysalis for over three years. We are really excited about this important new development for our clients and for our business. You will be seeing and hearing lots more from Mark in the future. Congratulations Mark and welcome on board.
Phil is back!
After a well-deserved sabbatical break to re-energise, we are very pleased to welcome Phil back to the team – he can’t get away that easy! With Mark coming in as a new business partner and the changing demands of our growing business, he will be taking a bit more of hands-off approach to the daily business demands, working three days a week.
Rest assured that Phil will remain very much a key part of Chrysalis going forward and has no plans to leave the business anytime soon.
The ‘world famous’ Chrysalis Christmas Party is also back!
After what seems like an age, we are on track to hold our next Chrysalis Christmas Party in early December. Having always received very positive feedback from the night, we are really looking forward to seeing everyone again to celebrate the Christmas period and to welcome in 2023. It will be great to get together again for a few drinks, nibbles and a catch-up chat.
Watch this space as we will be sending out more details in the coming weeks…
In other Chrysalis news
It’s with great pleasure we announce two new additions to the Chrysalis family.
Jasmin Mitchell joins us in the Client Services team managing our front office. With experience in the hospitality industry, a bubbly personality and great care for clients, Jas is a very welcome addition to our team.
We are also pleased to announce Cindy Feasey has joined us as a Client Services Manager. Cindy brings a wealth of corporate experience, partnered with a great ‘can-do’ attitude and care for clients – not to mention she lives on the Northern Beaches!
We welcome Jas and Cindy on board. They are looking forward to meeting you when you next call our office or are in for your next review.
Concluding…
2020, 2021 and now 2022 have certainly shaped up to be as unpredictable and dramatic as any years we have experienced for some time. We are living in complex times. And while we know markets move in cycles, you still need to make a conscious effort to keep your longer-term investment perspective and avoid decisions driven by emotion (fear or greed). As we have written previously, from our lengthy experience, decisions driven by emotion usually ends in tears.
We continue to be here to support and advise you on an ongoing basis. If you have something on your mind that you would like to discuss, whether in relation to your finances or any other matters, please reach out and give your adviser a call. Additionally, if you speak with someone you feel would also get value from our advice and support, please feel free to let them know about us. We are happy to help.
In the meantime, we wish you and your family a warm, safe and successful winter of 2022.
