With our share markets around the world in decline and certainly volatile, government debt rising (and quantative easing in full flow in Europe and Japan) and in Australia, personal debt rising, what is going on?

You are right to be concerned.  The CEO of the ASX is on record as saying that we have trillions of debt in the world and much of it wont be paid back.  What does this mean?   It means that the current system, if left unchanged, is going to be challenged like never before.  In the past, countries have been forgiven debt  or at least allowed to have the cost of the debt reduced.  Now, who will be making that decision when there are so many countries getting into difficulty?  Beyond me.

China is experiencing growing pains as it shifts to a more western economy and service rather than manufacturing dominance. They are still growing and so we do expect the consumption by the populace to be strong and supportive of companies which have exposure here.  The US is on a better footing now and if the $USD can remain relatively low, they will do OK.   Watch for lots of headlines of woe around the election there and look through them to the truth if you can.

Euro land is dealing with some major issues with Germany realising that a mistake occurred in opening the floodgates to “refugees” who are in the main single young males and not from Syria.  Embarrassing for them.  Downright hurtful to the rest of the EU in my opinion.  Getting these people employed and at least a basic language of the country they are living in will take time and a drain occurs on government money.  The private sector may well do OK as the suppliers to this group have a larger market.  We may well see the share markets rise in Europe.

The effects of the debt on the share markets are likely to be interesting.  If the central banks ( they are private enterprises not government) lift interest rates too soon we will have slowing economies earlier and this may lead to recession and a falling market.  Should the interest rates be reduced or left on hold then we have potential for a more bouyant share market and longer term, if a bubble forms, another sharp decline with real inflation at higher levels than one would like.

Folks, this has been the case right through modern history – markets go up and down with long term upward movements. Its just that with the amount of debt being so high, we are in new territory.

To have a portfolio that has a potential to weather a storm yet allow growth and still pay an income, come and talk to us at Financial Planning 4 Life either face to face or on skype.  Taking some of the expected volatility out can be beneficial to peace of mind which is priceless.