11 April 2020
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Get celebrating! The stock market has almost recovered

Peter Switzer
26 February 2018

When our stock market got the earthquake shakes on February 2, the front pages in the newspapers and websites were shock-worthy, with the old “$30 billion wiped off the value of our stock market” headlines knocking us out of our usual complacency.

But my question is, with the Dow Jones up over 300 points overnight and poised to push our stock market up today, possibly back to where we started before the sell off, why can’t we celebrate wins as well as we commiserate our losses?

I’ve asked a lot of my media colleagues what the headline is when a stock market recovers from a $30 billion meltdown? Is it a melt up? No, you can never try that as a headline.

What about $30 billion wiped back on to the stock market? This is great news but it doesn’t even grab an optimist like me.

You know, I have had some positive reaction to the Mr. Miyagi line from Karate Kid, with a twist, by saying the stock market is a case of “wipe off, wipe on” but it still doesn’t work as a headline.

When you think about it, the one thing most of us get to each day early is the media and it is overwhelmingly negative. And if you don't like sports news, you might seriously see very few positives that make you positive by the time you get to work.

Let’s face it, a lot of people are snaky in the morning, so if you add all that bad media news to the mix, it has to be a very special person who hits work with a massive smile on their face!

The irony is that if we focus on the positives we really should be programming ourselves for positivity. And we could be helped if media outlets started celebrating the good stuff that is with us more than the bad stuff.

For example, if the unemployment rate is 5.5% then you could argue, ignoring the statistical and survey problems with the data, that 94.5% of those who want to work are working. That’s worth cheering.

The rest of the world thinks our food, climate and natural environment is exceptional and that’s why tourists and immigrants want to flock to our shores.

Sure, we have stuff to worry about, such as Barnaby Joyce being forced to sack himself but really, is that important?

Our preoccupation with the negative closes doors on opportunities and the stock market is the best place to show you that being positive pays off. And it does so with money. Have a look at this chart:  

which looks at what happens to $10,000 invested in 1987 in a portfolio of stocks that matches the S&P/ASX 200 index.

Now this $10,000 had to go through the 1987 stock market crash, the dotcom bust of 2002 and the GFC bust of 2008 but it still climbed up in value to $113,405.

Keeping it positive, statistical analysis of stock markets show that for two or three bad years for stocks can come along out of 10 but the average annual return from a pretty safe portfolio of stocks (and you can buy such a collection of stocks pretty easily nowadays) will return about 10% plus per annum with half of this return coming from dividends, which have a tendency to grow over time.

They even can be quite resistant to falling even when stock markets crash because often the underlying companies still can do OK, even if a recession comes along.

The performance of our super funds is another reason to be happy and positive and a lot of their great results are linked to the stock market.

Chant West looked at our super returns since Paul Keating made super compulsory for us in 1992. On a balanced fund, the median return has been 8.3% and, after inflation, the real return was 5.8%. However the target was only 3.5%, so our super funds have largely done us proud.

And if you’ve been a home owner for at least five years in Sydney, Melbourne, Hobart, Canberra and Adelaide, you’ve seen your wealth go up, while Darwin, Brisbane and Perth have had other times when property was good to them.

The point I’m trying to make we have many more reasons to be positive about the stock market and many aspects of our lives, on average.

Sure, there are some unlucky individuals who have copped bad luck from life concerning family tragedies or illness but, all in all, we have plenty of reasons to be positive and it’s time a lot of us actually made the effort to leverage off it.

I don’t expect the media to ever give up on negative headlines but if you want to win in life, I advise you to go searching for the positives while recognising that negative incidents are possible.

Peter Switzer's book Join the Rich Club is on sale for 30% off from the Switzer Store until the end of Easter. Click here to pick up a copy today!

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