14 December 2019
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Should you let recession fears stop you from getting wealthier?

My Weekend Switzer story usually allows me to escape the hair-raising or hair-killing subject of the economy and business and how it can help or hinder our wealth. It means I can look at the drivers that seem more social or psychological. The irony is that what goes on in the brain and how it influences what we do is inextricably connected to success, which, in turn, impacts a person’s income generation as well as their wealth-building.

In my latest book, Join the Rich Club, I talk about the importance of having a mindset that will facilitate goals and actions that will lead to better results.

If you’re disappointed about your history of building up your bank balance and your portfolio of valuable assets, being positive around a well-conceived plan to get richer has to be a starting point,

One issue that has clearly started to rattle would-be wealth-builders is the concern about whether a recession is looming. I get questions like “should I be worried about a recession?” from my financial planning clients, my readers, viewers and listeners to my various media outlets and even the hosts of these media programmes are interested not only for their audience but for their own personal bottom lines!

The need to cover this was not only prompted by a client who asked for guidance on the subject to ensure he doesn’t see his million dollars in his super fund halved (like it did with the GFC crash, when he wasn’t a client, let me add) but because of a reaction I got from an expert on the subject earlier this week during our podcast.

Anthony Doyle is the Global Cross-Asset Investment Specialist for one of the biggest fund managers on the planet so he has to have a view on a global recession. As he’s based here nowadays, after years in the UK, he’d also have an Australian perspective on that damn R-word.

I started my interview by welcoming him and then asking straight out if he sees a recession soon.

It shocked him that I cut to the chase so quickly but I know that’s the best way to keep an audience, who potentially could be bored by two economists talking economics.

And thankfully he didn’t mess around, as many cowardly economists do and he simply said he doesn’t see a recession on the horizon. Like me, he notes the role of central banks to stave off a recession using zero or negative interest rates and even quantitative easing, if necessary, which basically means they’re throwing everything bar the kitchen sink at the potential problem.

If you want to learn more, check out the podcast but suffice to say that Anthony isn’t spooked. And though he didn’t point to the International Monetary Fund for support for his position, this week what the said organisation told us what their economic crystal balls were seeing about growth and therefore recession (which is defined as negative growth for at least six months) was actually heartening. This is what CommSec’s Craig James wrote after the IMF report came out: “The International Monetary Fund expects global economic growth to lift from 3.0 per cent to 3.4 per cent in 2020.”

Now that looks like good news for innocent readers and wealth-builders. But this is what the ABC led with: “IMF predicts synchronised slowdown in global growth, warns rate cuts are not enough to stop it.”

While on alarmist reports, have a look at The Guardian’s effort: “Global economy faces $19 trillion corporate debt timebomb warns IMF.”

Given the IMF’s own forecasts, I guess it mustn’t be expecting that bomb to go off in 2020!

No wonder people are spooked and recession-preoccupied when experts think one thing and media honkies are allowed to print and write anything that is the opposite, just to keep the products they contribute to relevant.

For an Australian perspective, the IMF thinks our growth story goes from 1.7% this year, which is less than what the RBA and Treasury think but next year we improve to 2.3%. This isn’t a recession story so maybe it’s time most of us actually investigate what headlines are telling us.

Of course, even the IMF would downgrade their growth calls if the trade war and Brexit challenges swing into the worst case scenario outcome. Boris Johnson and Donald Trump might not be regular guys but they’re not political or economic dummies.

I’m gambling these two guys and China’s Xi Jinping have no desire to be identified as the team that brought the world into recession.

Maybe that’s a gamble but it’s one I’m prepared to put my money on, at least for the moment!

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