Stock Market Corrects-Covid Disrupts Economy
I missed last weeks blog due to exactly what the title says above, Covid doesn’t disrupt the economy, it disrupts lives!
I have been sitting in bed the last three to four days with what has felt like the worst flu of my life, nausea, dizziness, constant headaches, lack of any energy at all and to top it off, my nose just started running…
But we aren’t here to take pity on my plight, if anything we are here to take in the lessons of the last two years. And one thing we have learnt from the last two years is that the economy is set-up by human productivity, and Monetary policy.
So what happens when monetary policy (money-printing from the central banks) will start to ease by potentially as early as the end of next month due to the most recent CPI (Consumer Price Index) report?
**If you are unsure of what the CPI report is and inflation in general, check out this website https://www.investopedia.com/terms/i/inflation.asp
What happens when schools go back and we potentially get an up-tick of Covid cases and therefore more people isolating at home? Therefore decreasing productivity…
I am not one to make predictions or bring out the crystal ball, however I can definitely see how the economy may slow down a little this year, or at the very least within the short-term.
You can see this portrayed through the volatility we have seen in the stock market recently!
All you have to do is check out the last week in the ASX200…
The ASX 200 over the last 5 Trading Days is down 6%
Which is moving into correction territory, which is when we see a drop of 10%.
Source: google.com.au/ASX 200 chart
I am not trying to bring out a fear at all about the market dropping or the economy slowing, but I do want to bring you the facts, just as Covid has disrupted our lives for the last two, nearly three years, there will be more disruptions to come.
You need to know the facts, to make educated decisions and understand that this year may be a tough year for investing.
But there is a silver lining!!
Where there are corrections and down times in the markets, this brings about opportunities for us investors.
I want to teach you the most important lesson as an investor in the equity markets, by simply showing you the graph below;
What you see above is 100 years of data from the All ordinaries index, which later was taken over by the ASX 200 inde. Now as you can see, there are a heap of downturns and corrections in the market, but the main thing I want you to concern yourself with is the starting point of the graph on the y-axis at the very left of the image.
You can roughly see that at the year 1900, the index was priced at about $50, by the end of the century we can see that the markets had increased significantly, even with a heap of downturns and multiple years of catching back up afterwards. The market always ends up better off.
That is why you should not concern yourself with the recent drop in the market, nor the disruptions happening with Covid still running rampant within the community.
If history is anything to go by, we will see the market back in the green and making leaps and bounds, when that will happen, we do not know, but right now, when the market is fearful, it is the best time to invest!
In my next blog, I will be completing the beginning investor series, I look forward to seeing you then,
Until next time,
Take Back Control
If you have found this Blog valuable, I would love it if you shared it with friends and family. The more the merrier, as I want to see each and every one of you learn to Take Back Control of your Life-Health-Wealth !
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** The article above only should be used for educational purposes only and is not financial advice, if you wish to invest in the equities market, I highly suggest that you seek advice from a professional that you trust!
