For everyone else (people trading properties or people buying a property without selling one, which includes first home buyers), lower prices are actually good news.<\/p>\n
And most people agree that in Australia\u2019s hottest markets of Melbourne and Sydney prices have started to get ridiculous. A reduction is probably a good thing.<\/p>\n
Share Market Update<\/h2>\nMarch was a reasonably good month for share investors. Having started the month at 5,704 points, the ASX 200 finished the month at a tick under 5,900.<\/h3>\n
This is a rise of 3.3%. Most of the gain happened in the last week of the month, where world share prices rose, encouraged by things such as rising interest rates in the US (yes, the very ones that saw interest rates rise for Australian property borrowers.<\/p>\n
Month by month analyses are not especially helpful in the share market. If we take the analysis out a little longer, then we can see that the 12 months to the end of March 2017 were collectively very strong. The ASX 200 rose from 5,082 on 31 March to that level just below 5,900 \u2013 reflecting annual growth of 16% for the year. Here is how the year looked graphically (thanks to Google and Yahoo Finance):<\/p>\n
![\"MartinCo-Market-Report-April-1-910x478\"](\"https:\/\/www.martinco.com.au\/wp-content\/uploads\/2017\/04\/MartinCo-Market-Report-April-1-910x478.jpg\")
<\/p>\n
And remember, this is the change in share prices: you need to add dividends to the overall rate of return as well. Dividends vary company to company, but they are typically around 4% per annum. This adds up to a 20% or so return on shares between April 2016 and March 2017.<\/p>\n
20% is a really good year – please do not think that this is the sort of return that you will get in any 12 month period! But share markets do this from time to time. That is why you hear people say \u2018time in the market\u2019 is the important thing: the longer your hold your investment, the more of these very good years you experience. What\u2019s more, it is worth remembering that, last April, no one was predicting that share market returns would be 20% for the coming 12 months\u00a0(although there was one US commentator who predicted a 50% fall during 2016. We won\u2019t mention his name as we are sure his mates have told him all about it. The interesting thing is that he remains a share market commentator. Some people have no sense of shame.<\/p>\n
The thing that no one could have predicted was the effect that the Trump Presidency has had on the US market \u2013 an effect which has flowed on to all other international markets. Indeed, virtually every academic economist thinks Trump will be terrible for the US economy. This does bring to mind a famous line by Paul Keating: the thing about backing self-interest is that you know it is always trying. And the share market is the place where self-interest manifests.<\/p>\n
You will hear us say it again and again. The short to medium term noise around the share market needs to be ignored in favour of the longer-term trends. Ten years plus is your best time frame for a share investment. Take your time getting money into the markets and then take your time getting money out again (so you do not get caught by the short-term fluctuations).<\/p>\n
This is one of the reasons why superannuation is such an outstanding institution. Periodically, throughout our working lives, money is contributed into super and from there most of it is invested in the share market. Why is this long term view important? Well, consider this graph sourced from the Economist magazine:<\/p>\n
![\"MartinCo-Market-Report-April-2-910x478\"](\"https:\/\/www.martinco.com.au\/wp-content\/uploads\/2017\/04\/MartinCo-Market-Report-April-2-910x478.jpg\")
<\/p>\n
This graph shows what has happened to economic output in developed economies like Australia throughout the last 20 centuries. As you can see, through most of recorded history economic output per person was flat \u2013 and lives were short. But, beginning in the 18th century, and then really ramping up in the 20th century, economic output per person has soared. In fact, inflation-adjusted wealth per person in countries like Australia has doubled every 35 years or so. This is now a long-term trend and, as such, it will not now be stopped. In the short term there will be negative years \u2013 recessions are inevitable. But long-term, the advances we humans have made in the last few hundred years will continue to hold\u00a0us in good stead. And if you own representative assets such as a diversified portfolio of shares or residential land in a well-liked location, you will participate in this continued advance.<\/p>\n
So there you go: this month we have given you an analysis of the last 2,000 years of economic development.<\/p>\n