Investors 1: 'Permabear' forecasters 0

When the ASX stock market gets volatile and the permabears come out, choose very carefully who you listen to.

A surprised and curious male investor drinks black coffee while reading the latest news on rising ASX shares in the newspaper

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Look, you're going to have to forgive me this afternoon…

I'm – to use the cricket metaphor – coming in off a long run.

You didn't listen to them, I hope?

Yes, I've got something of a head of steam up.

See, I saw two things on Twitter this morning. Apparently, the US indices – the S&P 500 Index (INDEXSP: .INX) and the NASDAQ-100 Index (NASDAQ: NDX) – are both now up 20% from their recent lows.

The NASDAQ, in particular, is apparently up 33% since late last year.

Why has that got me worked up?

Because knuckleheads (and I use that term deliberately) were telling us, before, during and since those lows, that the market was 'about to crash'.

There are the 'permabears' – those who always think there's a crash coming – who whip up fear and panic, driving nervous investors out of the market.

(I can never tell if they're just congenital worriers and genuinely believe this rubbish or if they're cynically playing on human fear. Either way, it's bad.)

And there are the traders. The people who, when the market is up on Monday, want to tell you it's going to crash Tuesday.

They're trying to play silly buggers with the hope of making a few per cent trading the market's volatile movements.


Meanwhile, if both groups had just invested… and waited… the returns would have fallen in their laps.

Talk about stealing defeat from the jaws of victory!

No, I didn't forecast it.

I don't do forecasts.

I just invest.

For the long term.

In quality companies.

Please, for the love of god (and the sake of your portfolios), stop listening to market forecasters. And that goes doubly for fear-mongering permabears.

Yes, markets will be volatile.

Sometimes, they'll fall, and our portfolios will shrink.

Yes, it'd be nice to avoid that.

But… we can't. At least not without also missing out on the huge compound gains that have come from just staying invested.

Remember, according to Vanguard, $10,000 turned into $131,000 over 30 years to June 30 last year.

And remember, some people said the market was going to crash last October.

Choose – very, very carefully – who you listen to.

(And next time the market crashes, remember things have always improved.)

Time for a mature conversation

Speaking of fear-mongering, is there anything more fraught than a national conversation about immigration?

Among the goodwill and genuine policy conversations, the topic gives cover for bigots and xenophobes to peddle their bile.

And yet it is a conversation we need to have. It seems pretty likely that the growth in our population is, and for a while at least, will continue to run at a level above our ability to provide increased housing.

And, as Year 8 economics will tell you, when the growth in demand exceeds the growth in supply, prices will continue to rise.

Which… adds to inflationary pressures while also risking other adverse consequences.

Now, I am strongly pro-immigration. We should use it to fill skills gaps, and we have a moral responsibility to help refugees.

But we should also manage our population growth (note: not just immigration) deliberately, in keeping with our ability to provide housing, supply infrastructure, and within our environmental limits.

For the absolute avoidance of doubt: I do not care from which country, culture or faith our immigrants come. If they have the right skills and they want to be here, they're very welcome as far as I'm concerned. There is no dog whistle here, and I'll condemn anyone who tries to use one.

It's the overall population growth I'm talking about here.

Yes, in the short term, population growth boosts gross domestic product (GDP). That gets the cheerleaders out. But we should approach population policy the same way we approach investing – with a long-term perspective.

There's no point growing the pie if the number of people eating that pie grows more quickly. That's the challenge for our policy-makers (and if they abandon the field, as is happening thus far, they leave space for the racists and troublemakers – and that gets ugly very quickly).

And in the meantime, it risks higher rents, higher house prices and higher inflation. Those are pretty ugly economic outcomes.

Quick takes

Overblown: This US debt ceiling thing? Look, predictions – as I mentioned above – are silly. But the odds of this thing ending well are very, very good. Oh sure, the American pollies will engage in some brinkmanship, but it's unlikely that the end result is a permanent loss.

Underappreciated: Apple's move into banking is another rattling of an increasingly brittle cage. Our banks are strong. And dominant. But strong and dominant enough to see off the global tech giants? It's an open question. Our regulator might stop them. Or their efforts might come to naught of their own accord. But don't assume it's inevitable.

Fascinating: Did you know that the NASDAQ is now 33% higher than its late 2022 high? Of course you did, assuming you read the top of this article! And yet, there's no market excitement yet. When it returns? Well, those who waited for the good news will have missed out on at least a one-third gain. It's ever been thus.

Where I've been looking: Speaking of technology companies, Xero is back over $100 per share. Others are on the march, too. But I don't think it's too late to find some beaten-down quality in this sector.

Quote: "The idea that a bell rings to signal when to get into or out of the stock market is simply not credible. After nearly fifty years in this business, I don't know anybody who has done it successfully and consistently. I don't even know anybody who knows anybody who has." – Jack Bogle

Fool on!

Motley Fool contributor Scott Phillips has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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