The slowdown in work and the pickup in activity with friends and family at the end of the year is always a good time for reflection. It gives us a chance to take stock and make some course corrections in our lives that aren’t as easy when we’re bogged down in the day-to-day activities of looking after children, school, health goals, investment goals, trying to catch big fish, and work. Again, the principle of “when in doubt, zoom out” comes in to save us!
Let’s quickly review what happened in 2023.
It’s been a terrible year when it comes to cashflow. Due almost entirely to the combination of the fastest interest rate rises since the late 1980s and the debasement of the AUD which caused our purchasing power to decline by 17% since the start of the pandemic. But despite what it might feel like, it’s been a great year as far as investments have been concerned. The property market is up by 9%, nearing all-time highs, same with the share market and gold. Rents have soared by about 15% as well, which has helped offset some of the interest rate increases (or added to cashflow pressures for those renting).
Remember that all the best times to be making investments always feel terrible and if you’ve made a move this year then congratulations! You’re in the 10% of investors that bought low and will make it. The good news is that it’s not too late and a purchase in 2024 will pay off nicely – if the rate cuts are delayed until Q2 that will be a gift for those who haven’t already positioned themselves for the bull run.
Next year we move into the Year of the Dragon. It symbolizes success, abundance, growth, and progress. If we look at the data it does indeed promise to be much better, interest rate cuts are more or less baked in which will bring in a flood of money to assets. With rising asset prices comes the wealth effect, which is a fancy way of saying, that when we feel richer, we spend more! This greases the wheels of the economy and gets things moving. When the interest rates drop, it will also take the foot off the neck of household budgets and we will all be able to breathe a little easier. Improved cash flow and higher asset prices are a win in my books.
What else has been happening?
A couple of nights ago my seven-year-old pulled me aside to have a ‘chat’ before bedtime. She was extremely concerned about growing up because she wouldn’t find things like cubby houses interesting anymore! So obviously this prompted me to tell her of the narrative archetype of The Hero’s Journey. The fact that this blueprint for storytelling can be found repeated across many cultures throughout all periods of history indicates that there’s something in it that helps us understand human nature and our own journeys of transformation as we learn and grow.
It begins with the hero doing ordinary things in their normal environment. Then an unexpected threat or crisis happens which is the call to action. At first, the hero resists out of fear or reluctance to leave their comfort zone. But the hero meets a mentor, a wise person who guides them with the tools or knowledge to get through their journey. The hero then begins the adventure and leaves their old life behind. They don’t know it yet, but they have initiated a sequence of events where they will never be able to return to their old life as the same person again.
The hero then faces tests, trials, obstacles, and enemies which helps reveal their true character and forces them to grow. Next, they enter the Innermost Cave. This is the heart of the challenge where they confront their greatest fear or weakness. Then they encounter The Ordeal (basically the final boss) where they face death and are forced to confront their mortality. This is where they re-emerge and receive their prize. It could be something physical or some form of knowledge, power, or self-understanding. Finally, the hero returns home, but they are not the same, the journey and knowledge they receive has changed them forever.
Anyway, this might have been the most long-winded and boring way of saying that during your investment journey, there will be all kinds of setbacks and unexpected events just like 2023 has thrown at us. Get used to it! We just need to hang in there long enough to see the rewards (2024-2027) and at the end of it, we will not be the same person…. We’ll be richer! (and hopefully a little wiser).
That’s enough from me… Spend plenty of time with your loved ones and forget about work for a little bit. When you’re old nobody will remember that stuff anyway. I wish you all a safe and happy holiday period!