Before we get to what is happening in the world and markets, some office news!

A very big congratulations to Niki Schneider (team member since 2011) on her marriage to Josh Baxter on the 20th of October. We are all very pleased for the happy couple and even more pleased that Niki’s anxiety levels can now settle back to frenetic!  A beautiful ceremony and also managed a honeymoon overseas, with only two cancelled flights.

At the other end of the parental journey, Joanna, who joined us in February this year (after escaping the Canberra climate), celebrated her daughter Sebrina’s wedding here in the Tamborine Mountains on the 11th of November. Our congratulations to Jo and Simon as very proud parents.

Joanna, as Mum, was a little less involved with the wedding than Niki, but both have ‘reduced complexity’ in their lives post ceremony.

Jack, who joined Darko’s team in June as part of our Graduate program has completed his Financial Planning Degree and moved to full time in October. A welcome addition to RFS and already making his mark.

We also welcomed Sam and Jemilia to RFS in this financial year.  Sam moved into Troy’s team in July and Jemilia joined Belinda’s aged care advice channel in October.

On a personal note, my son Graydon completed his double major in Engineering and Commerce at Monash and Troy’s daughter Audrey moved into her Grade 12 year. When Troy and I went into business together, Graydon was 12 and Audrey was 5.  That really doesn’t feel that long ago!

So let’s talk world stuff

According to United Nations models, the world population reached 8 billion on the 15th of November 2022.  Less than 100 years ago, the world population was only 2 billion. 

  • Interestingly India is projected to surpass China as the world’s most populous country in 2023 – yep next year!

Now if you were a catastrophist you might try and use this to sound the alarm bells of a potential Armageddon.  You wouldn’t be the first.

My favourite ‘expert’ was a gentleman named Paul Ehrlich – he wrote a book called ‘The Population Bomb’ in 1968.  He was a Stanford University Professor and he confidently declared in 1970 – “Population will inevitably and completely outstrip whatever small increases in food supplies we make. The death rate will increase until at least 100-200 million and will be starving to death during the next ten years.”

In 1970, the population was 3.6 billion and by 1980 we were happily feeding the vast majority of the world’s 4.43 billion. 

  • There is starvation in the world but there is enough food – we just aren’t getting it to them.

Now new readers of this blog might be scratching their head on how this relates to investment so please bear with me – longer term readers will know I will get to a point, but I love a good segue.

A last note on Mr Ehrlich – who was big news at the time. April 22, 1970 was the first date we had an ‘Earth Day’ and we still celebrate it.  That year Ehrlich assured readers that between 1980 and 1989, some 4 billion people, including 65 million Americans, would perish in the “Great Die-off”.

He was not alone and yes, other experts both challenged and agreed with him but frankly he was no more credible than a homeless person with a billboard strapped to his shoulders, standing on a street corner screaming to all and sundry that the end is nigh.  He did however sell a lot of books.

  • Fast forward to 2022 and that 8 billion number looks far scarier, and yes I can see an argument for a few less US politicians, however the future we are actually talking about is a decline in population numbers though not in every country.
  • To sustain population growth we need an average birth rate of 2.1 for every woman in the country (ignoring immigration) during their lifetime. The current number in Australia is 1.79 births, US is 1.64, New Zealand 1.61, Canada 1.40, and Japan is now under 1.3.  Japan’s population peaked in 2010 (128.1 million) and is approximately 125.6 million in 2022. China and Italy are some of the lowest birth rates at 1.2 CNN Population growth.
  • There are a lot of reasons provided for this and yes education is one – far less teen pregnancies nowadays – but the one that makes a lot of sense to me is the move from rural to urban communities.  On a farm, kids can be useful and reduce your costs.  In a city, they could be described as a ‘messy expense’.  Yes, they have some positives but you just don’t need as many of them?

Time for that segue

There are a lot of experts in investment markets and as we have pointed out in the past, for them to stay in the 24 hour news cycle, they need to get you to come back for more.  They can, however, fall in love with their own narrative and back themselves into a corner.  Paul Ehrlich was educated and firmly believed in his forecast, but if you had accepted his modelling, you would have spent all your money and waited for the big famine. Thankfully you would have been disappointed.

As we discussed in our October article, there is plenty of bad news out there. RFS. Are we ready to Capitulate?

Since I wrote the October article, we have had a budget (Australia’s books were far better than the negative rhetoric) and additional interest rate rises – both here and in many countries around the world.  Energy costs are going to continue to be front page and of course, the Ukraine and Russian conflict has a long way to go and winter is definitely coming to the Northern Hemisphere – this will be a very difficult time for Ukrainians.  Also news – 16th Nov – that ‘possibly’ Russian missiles overshot Ukraine and exploded in Poland, killing two residents. Update is these may actually have been Ukraine missiles chasing Russian missiles but these sort of mistakes can lead to escalation

The UK replaced its new Prime Minister in record time!  Goodbye to Liz Truss and hello to Rishi Sunak – goodbye again to Boris.

The US midterms are almost over and it looks like it is a Republican House and a Democrat Senate which arguably is a good result. Control of the lower house can stop the more radical proposals from the Democrats and the control of the Senate can block the more radical proposals of the Republicans. Trump has put his hand up again and I am sure everyone has their own opinion on that.   In investment terms, I would argue it is pretty non-consequential but CNN and Fox news will have a daily headline that can carry them all the way to November 2024.

Closer to home – we have floods again. Western NSW is looking severely battered with Forbes and Parkes really struggling.  This is likely to see an impact in produce aisles as well as the massive impact on local communities.

That all happened since October 20.

Many ‘experts’ would see this backdrop as very negative for markets and they may yet be right but the actual evidence is not supporting them at the moment.

Market Performance

Despite this backdrop from the 1st July 22 to 15th November 22:

  • The Australian share market is up by just over 9.0% (Still down -4.89% over the last twelve months); 
  • The US Market (S&P 500) is up 4.3% though over twelve months they are down -15.09%;
  • The UK FTSE 250 is up 4.4%.  Still down -17.35% over the twelve months;
  • the French CAC Index is up 12.0%, down -7.14% over the year; and
  • the German DAX is up 15.0% but still down -11.51% for the year.

Over the twelve months to October 31, 2022 our Core portfolio is still down but since 1 July this has rebounded by 5.45%.

So what is driving this?


This is the ‘elephant’ that we should talk about and plays into the results above.

Despite the geopolitical backdrop, inflation has started to ease.  Nothing substantial, but reversing direction.

Rate rises and cost of living pressures are slowing economies, so the result central banks were after, is playing out. 

  • We saw the Australian Federal Reserve Bank increase rates by only 0.25% to 2.85% (1 November 22).
  • The US lifted rates by 0.75% on November 2 but signalled it was willing to slow down.

This doesn’t sound like a big change in stance but for some investors, this is seen as ‘ringing the bell’.

Where to from here?

At RFS, we have said before that when quality is cheap it is a much better time to buy than when it is expensive.  A large percentage of positive returns are made during periods of uncertainty.  Once that uncertainty is removed, upside reduces.

We are still cautious for a number of reasons and they relate to how slowing economies behave historically though we have some mixed signals.

Normally a slowing economy should see:

  • Reduced Consumer confidence which is definitely appearing in the surveys (Australian Consumer Confidence Nov 22.);
  • Decreased household spending as consumers defer purchases and focus on non-discretionary spending; 
  • Consumers spend less money which means companies sell less product and inventories grow;
  • Less sales lead to lower revenue and profits;
  • Lower profits leads to cost reductions including staff; and
  • Lower job security leads to lower confidence which leads to reduced spending which continues to feed into this cycle.


  • Our mining and agricultural products are in very high demand so our trade surplus is still looking sustainable even though it may ease.
  • Our largest trading partner China is talking to us again though, can we stop pretending they have seen the error of their ways.  They are still militant and are a real risk to our supply chains in the Pacific. 
  • A more realistic reason they are back talking to us is that we have blocked them from the CPTPP trade pact. (The Comprehensive and Progressive Agreement for Trans-Pacific Partnership CPTPP Trade Pact ).  We are one of 11 countries in it and China will only get admission by unanimous vote. They have upset a few countries including us and Canada so I suspect it might be a motivator for Mr Albanese’s and Xi Jinping’s chats in Bali?
  • I think this has a long way to go but talking is a start?
  • We have a housing crisis.  We have no rentals and relatively little new construction. 
  • Now supply chains are softening with lumbar and transport prices easing so in a normal world we would see building activity increase. 
  • Building activity soaks up a lot of unemployment so job confidence improves.
  • Australians are travelling again and even business travel is getting back to pre-pandemic levels.
  • International tourism is returning and we need it. For the year ending 2022, international visitors were only at 14% of pre-Covid levels and total spend was at 22% of pre-Covid levels.  A cold northern winter could see a big lift in numbers and our currency makes Australia a very attractive destination.
  • We now just need more planes flying again. 
  • Businesses are all looking for staff, so jobs are available for anyone who wants one and businesses are paying more to retain staff.  (Probably don’t mention this to our staff?).

So that is the quandary?

So back to the experts.

There are very divergent views on the direction of markets at the moment, so definitely a period of uncertainty.

Inflation ‘is the dragon’ that must be slayed. 

  • Well yes but we have had inflation before and while our current crop of Treasurers (on both sides) may not have seen it, we did survive it.

Experts are useful but we balance any narrative with some pragmatic paranoia. Prophecies of doom grab headlines but the prophets are not held to account when it doesn’t eventuate and they turn up again each time someone will give them a microphone.

Our solution, which will not change, is evaluate the risk versus the opportunity and then tailor that to your personal risk appetite.

We can see opportunities but we need to get past this period and discount a lot of the noise currently causing volatility.

As always, if you have any concerns please talk to us. We are here to help.

Paul Forbes | RFS Advice CEO