Let’s face it: For those of us that aren’t business/finance-inclined, it seems like there’s no benefit to keeping up to date with financial markets or the global economy. After all, why spend the effort trying to understand such complicated matters when you’re already getting a comfortable salary? Let’s find out.
Everything Is Linked To Financial Markets
The reason is that everything in our lives is intertwined with what happens in the global financial economy. Buying property with a view of future interest rates could potentially save you tens of thousands in the long run. When the stock market/economy crashes, weaker companies would need to downsize – possibly leading to more unemployment in your sector. Or how about the scenario where your fixed deposit rates are no longer as attractive as they used to be?
Without a basic understanding of global financial happenings, you’d be at the mercy of situations like the above.
Advantages Of Understanding What’s Going On
By being a diligent student of financial markets, patterns that you couldn’t see before will start to emerge. For example, the recent problematic bond issues in the local oil and gas sector (eg. Swiber) could have been anticipated way in advance if one was watching oil prices decline a year earlier. Or that historically poor shipping conditions would have led to many job redundancies/corporate restructurings at local shipping houses.
Whether your goal is to position yourself to benefit from ongoing trends or protect yourself from possible job redundancies, there is no doubt that an understanding of financial happenings can help in your everyday life. Even if the only benefit is to save a little on your home/car loan rate, it will be well worth it.
Most Important Concept
If there’s one concept that is essential to everyone’s lives, it would be interest rates. Interest rates are simply the lever that central banks use to control economic output (at least in theory) – as lower rates encourage less saving/investments and more consuming/lending activities.
Bringing this into more recent context: Since the 2008 crisis, interest rates in the US (and by extension, Singapore) have been kept at historical lows in order to spur economic activity. A byproduct of that policy has been the ballooning of asset values, seen in property markets. On the flip side, when interest rates are expected to rise (US expected to continue rate hiking cycle), then properties are likely to see some price declines, which is exactly what we’ve seen locally.
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