Why stock market returns have been falling for almost a decade
Stock market returns are falling and analysts are beginning to warn investors that the economy could be on the verge of a serious recession.
But why has the market gone into the toilet?
The answer is simple: it’s all about money.
It is a phenomenon which has plagued economies for decades and in the aftermath of the financial crisis it was only a matter of time before the economy would have to hit bottom and a serious decline in stock prices would result.
And that is exactly what has happened.
Stock market returns fell by over 60 per cent from their peak in the year 2000, before bouncing back to their pre-crisis level in 2016.
In fact, over the last three years the stock market has risen by nearly 200 per cent, and even in 2017 there was a drop of around 15 per cent.
Why are investors so scared?
This has been the case for the last 20 years, and as the recession hit, investors were left with the feeling that the future was grim.
It was no longer possible to make a good investment and that could have been a very real possibility for many investors.
And what was it like to be a shareholder in a major Australian company?
In my case, the situation was not quite so bleak, but it was still very grim.
I was in my mid-40s when the crisis hit and had just bought a company that had grown to become one of the biggest in the world, and the company was going through a massive restructuring.
I wasn’t going to be able to keep the money invested in the company for very long, and I had no intention of ever investing in the business again.
My family had already invested some of the money I had made in the stock through an annuity and it was now time to put some of that money towards a deposit.
What I didn’t realise at the time was that the bank where I had put the money would soon close my account, which would have meant that it would be unable to lend me money to cover my interest.
So, the cash I had in the bank would be lost and I would have been forced to make my first ever real-terms loss in my life.
As a result, I decided to put all of my money in a savings account and move to a new city.
In the past few years, as the stock markets have been rising and the economy has rebounded, the number of people that are working has dropped.
People are now working fewer hours, fewer days out of the year and fewer hours at home.
But while this has helped the economy, it has meant that the average person has been left with a much smaller cash cushion to fall back on.
What’s more, the financial sector is seeing a rise in bad loans and interest rates have risen significantly.
In Australia, the total amount of bad loans in the banking sector is now more than $3 trillion and it is only expected to grow.
And this has meant the people that have been most vulnerable to the financial system are also the people most likely to suffer the worst consequences of it.
In short, the average Australian is struggling to keep up with the rising costs of living and to get by.
I am not the only one.
In New South Wales, the population has fallen by more than 30 per cent over the past 15 years.
And as the economic recovery has hit and the financial markets have risen, the jobless rate has risen from 14 per cent in 2008 to 17 per cent today.
And with the number working on average less than 25 per cent of the population, there is no longer a large enough cash cushion for people to fall behind.
This means that there are a lot more people with a real-life financial challenge in their lives and a lot less money in their pockets.
I have been in the market a long time, and have been fortunate enough to make many good investments over that time.
But the markets have not responded to my own circumstances and, as a result of the downturn, I have been left in a difficult position.
So I feel that the markets are on the brink of a real recession.
I believe the stockmarket is on the precipice of a crash.