Articles

Leave The Financial Markets Pain Where It Belongs.

Everywhere you turn today there is media coverage citing ‘evidence’ to support continued claims of the imminent arrival of financial Armageddon. It seems as if every financial market employed economist, media commentator, politician, union leader and newly discovered expert has found that black hats are the only colour to be seen in this season if you are a horseman of the apocalypse.

There is no doubt that we are seeing a financial markets pandemic, the likes of which have never before been seen or experienced and therefore many people can be excused for their behaviour due to a lack of precedent in how to respond. The scope, shape, speed and force of this ever-mutating virus are patently obvious within the area that caused the outbreak in the first place and that is directly infected and affected – financial markets.

However, the somewhat hysterical and increasingly me-too crystal ball gazing masquerading as ‘forecasts’ sounds increasingly like a sub-section of our broader community really just want us all to share their pain.

The paper value of shares, funds and other assets has been slashed. The very same paper value which drives the remuneration of those people employed in financial markets. You and I have paper losses on our superannuation funds – money which is mandated by government to be taken from our incomes and placed into managed investment savings that are meant to grow.

It is hard to pull back and look at the bigger picture at times like this but we are very lucky to live in Australia because we are better structured, better regulated and just downright blessed with the state not only of our economy but also of the underpinnings of our revenue generation.

Despite the negativity, unemployment has not skyrocketed. In retail we have thousands of unfilled jobs. Household income is still rising. Household retail expenditure was more than +6% higher in both December and January compared to a year ago and rolling retail sales growth is currently above +3% MAT. In Australia, shoppers spend what they perceive they can spend. Sentiment may be at an all time low, but expenditure is also at an all time high. Perhaps the saying is true – “When the going gets tough, the tough go shopping!”

Financial markets are driven not by logic but by sentiment and self-belief. The emotional fuel that drove the market up, is what drives the market down. There are people in the markets who make money when values are dropping and there are people in the market who make money when values are rising. Markets are manipulated for movement that caters for the positions the alpha-males take with investments and it is investments that are being hit.

Retail is driven by observable behaviour and the effect of physiological triggers on shoppers but the pain the markets want us to share could change the self-belief of retailers in a way that turns prophecy into reality. Retail is healthy in Australia and while retail growth has slowed relative to the unsustainable growth we enjoyed up until 18 months ago, the market is still in growth. Be positive. Be focussed. And let your actions speak louder than the words you are hearing.