The correct answer is “we don’t know.” No one does.
Let’s guess – we may as well, in the absence of any intelligent analysis.
Share prices are down.
We know that.
But unless we are about to cash in our shares, does it matter? They aren’t down because the companies are out of business – though many may be struggling. Share prices in fact reflect anticipated future company earnings – that is, profitability – and that could mean this year’s profitability or that in ten years’ time.
You could say that the buyers are the optimists, and figure their expectations of future profitability into their preparedness to buy the shares.
Sellers, on the other hand, may be pessimistic about the same company shares, or may have a different time-frame for their expectations.
So what do we learn from this?
Once again, the lesson is – “It’s all about Income.” But, then again, why are we investing? As our Client, we assume you are investing for your financial security – in most cases this means to be debt-free and have an adequate lifetime income-stream (ie a pension).
Well, – and stating the obvious – its not about gambling on share-price increases. (Did someone say ‘Which increases?”)
Whilst there’s never any absolute certainty of outcome, both reason and history have clearly demonstrated that the best chance of reliability of a consistent and growing income-stream is that which flows from a well-managed, reasonably diversified, Australian share portfolio – ideally within one or more managed funds such as those that have for many years made up the Superannuation and Pension funds of our many Clients.
Australian Shares. Managed Funds. Add to these, the (generally unrecognised) benefit of Imputation Credits that enhance your income-return, and we have a potent formula for seeing us – and our savings – through whatever the future holds.
With the right investments, we can have cause for optimism.
Here’s to a Covid-free future.