In 2020, I was convinced that Australian property prices were going to fall.
It seemed like a simple (and accurate) narrative. The COVID pandemic was slowing down the economy, leaving many businesses no choice but to lay off some of their employees. Higher unemployment, less demand for housing.
I was wrong.
What I failed to recognise was that demand doesn't operate in isolation. Interest rates fell, government support stepped in to help households weather the storm, and banks continued to extend credit to would-be home buyers.
The mistake lived in the choice to take a single symptom as grounds for an entire diagnosis. And while this situation applied to property, the same lesson can be transferred to investing in companies.
You can see the same thing in Europe's brutal heatwaves. Demand exists, but so do regulatory hurdles and culturally based preferences. Again, it makes the narrative less straightforward than you might think.
At the same time, it can help investors understand where the potential catalysts are (if those obstacles are removed).
Whatever the next big theme may be, this week's Market Insights makes a habit of asking what's standing in its way, and what would move it.
Sincerely,
Mitchell Lawler, Senior Investment Editor
