Geshy Singh
We have discovered especially from recent events that politics affects the economy globally and nationally. But the underlying cause all boils down to sentiments and how investors ‘react’ to events and often not due to the event itself.
For instance, I have had people approach me horrified about the country’s looming junk status but if I had to ask them if they knew what it means they reply:
“The country is falling apart!”
No its not, it’s really a down grade in the sovereign credits rating. It should impact fixed interest and bond rates as foreigners may switch their funds to a more competitive country’s government bonds but should not have a huge impact on equities.
So, yes while it will have an influence on the markets and ordinary man on the street, it doesn’t mean that the country is declared bankrupt. Take the extreme vetting issue in the Unites States of America for instance, the media is creating an absolute frenzy, however President Trump’s policy is no different to what Obama did in 2011 when he banned refugees from Iraq for six months.
Also the seven countries that are currently temporarily banned were named by the Obama administration not Trump’s. This is a typical example of how the media has the power to sensationalise events, which manipulates public reaction.
So, my point is that over reactions by investors spurred by emotions without making calculated and informed decisions, could be costly. Rather get your planner to implement a plan that incorporates potential market volatility instead of making major changes.
Also save, save, save more. It’s a great time to buy in when the markets are low! It just makes sense that because we expect lower future growth we need to put more aside and take advantage of cheaper unit prices for a long-term plan. The idea of creating your own wealth by saving should never be undervalued.
