Why the Trump slump market won’t last: Barefoot Investor

Barefoot has two tips for getting through the sharemarket downturn: don’t check your share prices and whatever you do, don’t listen to forecasters.

Scott Pape is The Barefoot Investor. Picture: Jason Edwards

“Grab your dressing gowns … we’re going on a magical mystery farm field trip”, I announced to the kids.

Their little eyes lit up as we trekked out of the house, through the gate, past our rapidly evaporating dam, and down to our 200,000-litre rainwater tank.

“How much water is in our tank?” I asked the kids.

My eldest started knocking the side of the tank – and found it was as hollow as Albo’s re-election pitch.

“It’s practically empty!” he gasped.

“Exactly!” I cried.

And so, with my little troops lined up in their jimjams, I went into full ‘Drill Sergeant Dad’ mode:

“And do you know what that means?” I said, eyeballing each of them.

“No flushing the toilet anymore?” giggled my four-year-old.

“No, that’s disgusting! It means that, until we get a good rain, you’re all sharing a bath!” I said sternly.

End of field trip.

Welcome to life on the farm.

“Farmers in Western Victoria grapple with the worst drought conditions in almost two decades”, said a headline from the ABC last week.

Uh-huh.

The article continued:

“BOM senior meteorologist Zhi-Weng Chua isn’t seeing any drought-ending rain in the forecast.”

What a … BOM-mer!

Yet hang on a minute, how does the Bureau of Meteorology know what the weather will do in a month’s time?

They don’t!

And this is exactly like the share market right now.

“Aussies super in freefall because of Trump” …

“Fortunes lost in blink of an eye” …

“Markets are in crisis today as Donald Trump’s reign sparks terror across America. And we might not be able to escape the fallout” …

… screamed the headlines this week.

Holy Hector!

Yet another, way less exciting, way of writing that headline would be:

“Stocks have fallen to levels not seen since … last August.”

I know, I know, I’m hitting you with the sensible stick. And the question you really want to know is … is this the start of a much bigger Trump slump that will actually see your super in freefall?

Well, the honest answer is that I have no idea. However, what I do know is that the world has faced much bigger threats than Trumpty Dumpty and his untrusty sidekick the Muskrat:

Like World War I, World War II, the Great Depression, the Spanish flu, the Vietnam War, the Korean War, the Holden Captiva, the Global Financial Crisis, Covid.

And, throughout all that, since 1900, the Aussie share market has had 101 ‘up’ years and 24 ‘down’ years, according to AXA.

The sharemarket downturn won’t last, says Barefoot Investor.

When you look at the yearly returns over that time, what stands out is there weren’t that many years where there were thumping gains, or wipeout losses.

So, predictably, the clickbait headlines are dead wrong: ‘freefalls’ simply don’t come around very often. Instead, most years are pretty boring – averaging around 10% – 20% gains.

Put another way, if you chipped $1 into the share market in 1900 you’d unfortunately be dead by now. However, your great-grandkids would be able to buy a (semi) decent joint in Sydney: that buck would have grown to $4.2 million.

Okay, so that’s the history. Yet we live in the here and now, where sophisticated algorithms are programmed to scare us so we devote the best years of our lives staring at their overlords’ ads.

Well, here are my best tips for surviving this market drought:

Many years ago I sold all my individual shareholdings and moved to low-cost index funds, and then deleted the ‘Stocks’ app on my phone to stop me from doom scrolling share prices throughout the day.

It worked.

Here’s the irony, though: over the past couple of months I’m ashamed to admit that I’ve been checking the BOM app at least five times a day. So this week I deleted it.

After all, do I have any control over when it will rain next?

No!

(Okay, sure the thought of doing a naked rain dance in the middle of the paddock crosses my mind every so often, but on the whole I’m much happier not having the lack of rain a constant depressing reminder in my pocket.)

Besides, am I so stressed out that I would actually consider selling the farm?

Hell no!

Truth is, I see my share portfolio exactly the same way I see the farm:

I don’t really care about the price of my farm, only the bumper crop of dividends that the land delivers me each and every year. That’s why, in addition to automating my regular share purchases, I now rarely check my portfolio of index funds, and I am much happier for it.

So that’s my first tip: don’t check share prices. Just don’t.

Second, don’t listen to forecasters (as Judge Judy once quipped: “Don’t pee on my leg and tell me it’s raining!”).

Finally, understand that this downturn will not last.

Know that it never lasts.

In fact, what history does show is that the larger the downturn, the higher the future returns. Or, in other words: don’t throw your babies out with the bathwater.

Tread Your Own Path!

Bridget Jones Scores $900

Hi Scott,

I love your columns and still use your buckets 10 years after reading your book. I’ve saved and paid off my debts, but your email today was perfect timing. Last week, I put on my Bridget Jones big girl pants, called my insurance company, and questioned a $500 premium hike. After seven years of loyalty I was ready to switch, and they offered me a $900 discount – cheaper than any other quotes I had. I danced around my kitchen with joy! Thank you for empowering me to question big companies and say, “That’s not good enough, I want to pay less”.

Kathryn

Barefoot recommends calling your insurer to get a better deal.

Hey Kathryn,

You, my friend, just pulled off the ultimate power move – pants on, phone in hand – and now you’re $900 richer. And you’re not alone – I’ve been inundated with stories of people saving hundreds with my five-minute call.

Now, a quick Public Service Announcement (PSA): Some readers pointed out that turning off auto-renew could mean forgetting to renew altogether. Don’t stress – your insurer will remind you. Yet, just to be safe, set a phone reminder for 11 months from now so you can rinse and repeat the savings next year.

I’ve Been Bawling My Eyes Out

Hi Scott,

I’m in the middle of this cyclone in Queensland. I have just found out I’ve been scammed after reading your ‘scam the scammer article’. I’ve been bawling my eyes out and I’m writing this with blurred vision. They drew me in with all the tricks you described. Even worse, I applied for a short-term loan on the scammer’s platform to trade but have not paid this loan back. I’m afraid they will come for me and want their money. Is this possible? I hope you can help in answering this question as I am not doing so well emotionally because of this.

Christina

If you have been scammed, IDCARE (idcare.org) – can help with support and online security.

Hey Christina,

I’m really sorry you’re going through this. I can only imagine how overwhelming it must feel, especially with everything else happening around you.

So I have bad news and good news:

The bad news is that you’re right – it’s a scam. Any money you’ve put in is gone and, unfortunately, there’s no way to get it back.

The good news? The ‘loan’ they roped you into doesn’t actually exist. They have no legal power over you, and you don’t have to pay them a cent.

Now there are three things I need to do:

One, block the scammers on WhatsApp, Facebook, and anywhere else they try to contact you.

Two, reach out to IDCARE (idcare.org) – they’ll help you with support and online security.

Finally, pick up when I call you later this week – I just want to check in on you.

You’ll get through this and come back stronger. Promise.

DISCLAIMER: Information and opinions provided in this column are general in nature and have been prepared for educational purposes only. Always seek personal financial advice tailored to your specific needs before making financial and investment decisions.