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Hi Team,

Everything you read at present says that the global economy is "going to hell in a hand basket".

Whilst most countries are trying to recover from the pandemic the combination of government stimulus packages, manufacturing and supply chain issues and long-term low interest rates have resulted in runaway Inflation. Added to this the war in Eastern Europe is causing massive disruptions in oil, gas and grain supplies that is adding significantly to the cost of living.

This perfect storm of economic conditions has rocked the stock market in all major countries.

The graph below shows the performance of Australian shares (All Ords) and American shares (S&P 500) for the financial year to date.

Both have fluctuated significantly but the US market has seen near record losses between Dec and Feb (minus 12%), then again in April (minus 8%). The biggest monthly losses since the 2008 financial crisis.

Fluctuations in the Australian market have been more moderate, but we have still seen ups and downs of 6% and 8% between Dec and march.

Chart, line chart

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So what does all this mean for all of us "normal people" and should we all be worried?

Yes there are some very worrying signs (rising interest rates, poor stock market performance and rapidly rising cost of living), so now is the time to put your "financial intelligence" to work and come up with a plan to weather the economic storm that is upon us.

Financial intelligence is a topic I have devoted 18  Weekly Emails to over the last 3 years. Back in Feb 2019 emails # 10 to 31 covered everything from how to create a simple financial plan for saving to superannuation and estate planning. Then a year or so later emails # 118 to 122 covered inflation and real estate investment.

Money management and financial intelligence is obviously one of my favourite topics to write about. That's because this topic covers human behaviour, philosophy and economics and is a huge influence in how enjoyable and fulfilling your life will be.

So if you are not 100% confident in your own financial intelligence, now would be a good time to go back and read these previous Weekly Emails as well as a couple of books (see below), before making any financial decisions.

Two books I Highly recommend are,

  1. Scott Pape "The Bare Foot Investor” (super easy to read and understand).
  2. Morgen Housel "The Psychology of Money" (the best book on financial intelligence that I will reference heavily in next week's email).

Thanks for reading,
Stay safe and watch your pennies.

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