It is said that time heals wounds. In the world of financial wounds, we are now nine years into our recovery after the 2009 global meltdown. Our recovery has been made possible by our central bank and other government prescriptions which included huge doses of extended ultra-low interest rates, in some cases negative interest rates, piles of printed money, central bank purchase of toxic bank assets, lower taxes and increased government spending.

Nine years of huge increases and all time highs

This, in all its glorious concoction has somehow worked and has done wonders for keeping the financial wolves at the door. To the delight of many investors, it has provided nine years of huge increases across the board in stocks, bonds, property, and collectibles, and has even inspired mass adoption of digital coins. Most of these assets have seen all times highs, with records being broken and valuations being pushed to levels not seen since the dotcom bubble. These increases have created FOMO (fear of missing out), encouraging even more participants to join in on the profits, pushing things even higher.

From where I sit in my office in Brisbane, looking over the portfolios of my Financial Planning clients, I can’t help but come to the conclusion that we are in the daredevil peak of this market…all risk and little return.

Call it a gut feeling, but know that at some stage the medication will cease to be prescribed, creating even an even larger financial wound than the one created initially by the toxic mix of medications.

According to these 3 measures the stock market is now literally off the charts

What will pop the bubble?

I find myself constantly trying to foresee how things will play out in the markets. What will be the catalyst that pop this party balloon – will it be rising interest rates that slow the global economy. Sinking it into recession and chopping company earnings in half and the stock market with it? Will it be the estimated $210 trillion in United States unfunded pension liabilities that will bankrupt a number of key States create a ripple effect throughout the global economy? Or will it be something which is not even on our radars, such as the huge demographic shift of baby boomers leaving the workforce and in doing so turn net sellers of financial assets to fund living costs? It may end up being something which takes even the most experienced and knowledgeable investors by surprise.

The best you can do is keep an eye out for the risks and the potential future rewards.

Sound financial advice is a medicine best taken as a preventative rather than a cure. If you or anyone you know needs assistance with financial planning needs please direct them to our Brisbane office. And after reading this article you believe you need an assessment of your risk profile. To ensure you are protected for future stock and bond market volatility please contact us for a no obligation appointment.

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