In my opinion, where the economists and the big banks get it wrong is that they spend more time looking at charts and graphs than opening their eyes to what’s happening in the real world.
As I see it, the Australian people are the greatest asset when it comes to assessing how the economy is really affecting us.
Last week, I decided to find out how people are really feeling, and where they would put their money today to ensure a better return for the future. I took to Twitter and asked, “What is the best asset class to invest in right now: shares, property or cash?”
A few weeks ago I talked about the six key asset classes that are most popular for investors: cash, Australian fixed income, international fixed income, Australian shares, international shares and property. I chose three of those six purely based on offering some variety, and the responses were quite interesting. But before I tell you the results of my Twitter conversation, let me briefly say something about shares, property and interest rates today.
In recent news, the volatility in the Australian share market has been making headlines and has impacted us all in declining superannuation balances. The two biggest parts of our share market are represented by our banks and our resources companies, which have taken a beating due to the global debt crisis and the economic slowdown in China. In all honesty, the share market is still well below its pre-GFC highs and doesn’t look like getting back there anytime soon.
Australian residential property has likewise struggled. Generally, prices have not risen since March 2010. However, house affordability has been rising with the increase in disposable household income. This combined with an improvement in residential property prices and recent auction clearance rates might suggest an improving trend. Finally, interest rates directly impact on how much you can earn on your deposits and they are the most difficult to predict. Every month we wait for the Reserve Bank’s decision on monetary policy and this month we were delivered a rate cut. But the reasons for movements in the cash rate are varied and the Reserve Bank needs to balance conflicting signals from inflation, currency movements, unemployment and offshore influences to make a decision.
So back to my Twitter survey. I can tell you that I was impressed. Many people chose property, with cash coming in a close second and shares bringing up the rear. The results were very tight which showed me that people are taking their personal financial situation into account when making investment decisions, which is all I could ever ask for. Want to join the conversation? Talk to me on Twitter at @markbouris.
* Mark Bouris is the Executive Chairman of Yellow Brick Road, a financial services company offering home loans, financial planning, accounting & tax and insurance. Email Mark on mark.neos@ybr.com.au with any queries you may have or check www.ybr.com.au for your nearest branch.
