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AUTUMN 2023 YOUR PERSONAL WEALTH WELCOME TO AUTUMN Quality financial advice will give you confidence that your investments are well looked after despite a potentially bumpy road ahead In addition to our investment market outlook we look at why the Reserve Bank is obsessed with inflation and the impact of the rising cost of living and market uncertainty on retirement expectations To wrap up we look at seven productivity tips from billionaires to help you work smarter We hope you find this edition valuable Investment outlook 2023 1 Why is the RBA obsessed with inflation 3 Retirement recession the cost of living 3 Seven productivity tips from billionaires 4 OUTLOOK 2023 CAUTIOUS WITH SOME OPTIMISM We anticipate a difficult and volatile year ahead in investment markets At a time of record government and consumer debt levels 2022 saw the return of persistent inflation for the first time in 40 years with central banks pushing up rates to levels that deliberately slowed economic activity This was exacerbated by geopolitical factors that significantly disrupted supply chains and sent energy prices soaring The UK debt crisis also showed that investors are concerned about the management of the massive levels of global debt The result was the biggest market storm in decades Global stocks finished the year down 18 in US dollar terms down 12 5 in AUD terms and making things worse for the first time in decades bonds also fell as they were unable to offer either income or diversification benefits with global bonds hedged ending the year down 12 We entered 2023 with global growth and money supply falling rapidly in developed markets and key leading indicators of economic growth in recessionary territory While stock markets have had a good start this year we envisage a US lead global recession in 2023 However we believe the chances of the recession being a deep one such as in 2008 as low to moderate That recession lasted for 16 months and global GDP and stock markets fell heavily Our base case envisages an average recession in the US where GDP growth is negative 1 2 earnings fall by another 5 15 from current levels and CONTINUED ON PAGE 2

AUTUMN 2023 CONTINUED FROM PAGE 1 the S P500 falls by 15 25 from current levels Further we expect most economies to follow the US into recession with varying degrees of severity and timings On a positive note we anticipate a recovery in the markets likely to at least have started in the second half of 2023 which may result in the markets producing a moderately positive or negative return this calendar year The actions of the US Federal Reserve in a recession will determine how quickly any recovery occurs In Australia unlike in the US inflation continues to rise meaning that interest rates here are likely to rise and be held at high levels even if the US Fed reduces interest rates earlier than expected The recovery in the Chinese economy is however a positive for the global economy especially for commodity producers like Australia Preparing for a range of possible outcomes The chart below from Capital Group shows the complexities of investing in 2023 As can be seen it boils down to two questions How persistent will inflation be and Where are interest rates headed Added to this central banks around the world are following different paths leading to a wide range of outcomes Market recovery and upside potential In this environment we do not expect the Australian Stock Exchange ASX to outperform significantly as it did in 2022 because the value stocks that dominate the ASX especially materials and banks do not traditionally perform well in global recessions While the Fed may be considering reducing rates the RBA is holding rates at a relatively high level making conditions difficult for home owners and borrowers However the recovery in China is positive for Australia Analysis shows that since 1950 recessions are not very long averaging 10 months Importantly while stock markets typically lead the economy into downturns history shows that they rebound about 6 months before the economy recovers This may occur in mid to late 2023 In the second half of 2023 markets may begin to factor in a recovery in company earnings Depending on forward PE assumptions the upside potential for the S P 500 could be around 4150 after the recessionary impact Managing your portfolio Flexibility is paramount Until last year portfolio construction could be largely set and forget as both stocks and bonds did well due to fiscal stimulus and interest rate falls We believe that going forward stock market and listed property returns will be lower and more volatile On the positive side we see opportunities in defensive asset classes such as bonds and investment grade corporate debt Overall the construction of portfolios in each asset class needs to be flexible As this cycle plays out opportunities will emerge and disappear relatively quickly We see a US recession and associated fall in stock prices around the world for the following reasons inflation remains elevated in Australia and the US partly due to record labour shortages especially in the US and although goods costs are falling services inflation remains high the Fed is unlikely to cut interest rates until at least late 2023 as they will want to avoid inflation returning in 2024 global money supply is at low levels at present which does not support financial assets in the near term global central banks are actively tightening monetary conditions investor business and consumer confidence are at near record lows a recession is not fully reflected in current stock prices and valuations particularly for an average or deep one YOUR PERSONAL WEALTH Conclusion The economic conditions ahead over the next few years and the implications for investment markets will be challenging Greater market volatility means we will be working hard to assess market conditions make appropriate portfolio changes and seek to capture opportunities Our role as your professional financial adviser is to continue to educate and inform you with respect to market conditions and ensure that your portfolio continues to meet your investment needs objectives and circumstances Quality financial advice will give you confidence that your investments are well looked after despite a potentially bumpy road ahead PAGE 2

AUTUMN 2023 WHY IS THE RBA OBSESSED WITH INFLATION RETIREMENT RECESSION AND THE COST OF LIVING Headlines and opinions are flying left right and center following the Reserve Bank of Australia RBA s ninth rate hike in a row in February and its governor Phillip Lowe asked to front a recent parliamentary committee hearing with a please explain We thought it a good time to dive into why it is that the Reserve Bank are so keen to tame inflation As the cost of living and market uncertainty continues to rise it s no wonder less than 15 of pre retirees expect their retirement lifestyle to be an improvement on their current lifestyle To understand why the RBA is obsessed with inflation it s important to understand that inflation is a permanent tax on everyone and everything It impacts lower income earners hardest Whilst the cost of money including mortgages and other loans gets bumped up every time there is a cash rate rise announced by the RBA despite this negative and uneven impact importantly it is a reversible and temporary impact The Super Savvy Report 2023 1 by CoreData and Australian Seniors explores what matters most to our senior community Surveying over 5 000 Australians over the age of 50 the report found the rising cost of living is the number one financial concern for older Australians It s clear our ageing community is concerned about staying afloat with many of those surveyed considering or making lifestyle changes These changes include The Reserve Bank uses an inflation target Consumer Price Index of 2 3 on average over time to help achieve its goals of price stability full employment prosperity and the welfare of Australians 1 Price stability with low and stable inflation contributes to sustainable economic growth Inflation erodes the purchasing power of your income and wealth If inflation is too high for too long the value of real money is reduced higher wage growth leads to ever increasing prices and higher unemployment and spending and investment decisions may be distorted Higher inflation can also lead to greater market uncertainty with lower returns on investment and reduced international competitiveness When the inflation rate accelerates and stays high it can create a wage price spiral If for example the underlying inflation rate were to rise to 5 every year for 4 years this would require an increase in salary of 22 over that time just to keep up Current enterprise bargaining agreement EBA wage negotiations are based on a 3 year average underlying inflation rate If the inflation rate spirals upwards the average underlying rate also increases If this happens when future EBA agreements are negotiated this puts upward pressure on wages that impact broad sections of the economy such as transport and minimum wages We saw this happen in the 1970 s when inflation got ahead of the Reserve Bank s efforts to curb it we experienced stagflation a period of stagnant economic growth accompanied by persistently high inflation and a sharp rise in unemployment and we were playing catch up for a decade to try and get inflation back under control Almost 8 in 10 are concerned about the impact a major recession and market downturn could impact their retirement savings with close to 3 in 4 concerned about recovering from a recession when they have minimal time to recoup these potential losses Interestingly only 1 in 5 feel they have a strong understanding of the impact a major recession may have on their super and retirement preparation There s no doubt that super plays a pivotal role in our financial plans After all the higher your super balance the more money you could have for retirement However it s clear that the rising cost of living and the threat of a recession are front of mind for many as they approach their retirement This is the situation the RBA is trying to avoid As your financial planner we can help you be better prepared to weather the potential impact of rising costs of living and to better understand the opportunities and threats of economic cycles 1 https www rba gov au education resources explainers australias inflation target html 1 https www seniors com au news insights australian seniors series super savvy report YOUR PERSONAL WEALTH PAGE 3

AUTUMN 2023 SEVEN PRODUCTIVITY TIPS FROM BILLIONAIRES There s one thing for certain we all have the same amount of time each day How is it then that some people seem to accomplish more sometimes even while doing less in their lives You need to focus on working smarter Here are some productivity tips from billionaires like Bill Gates Jeff Bezos Warren Buffet and Richard Branson to help you work smarter Block your time for maximum effectiveness Schedule time based on your calendar not a to do list Bill Gates Elon Musk schedule into 5 minute increments According to Parkinson s law work expands and contracts to fill the time allotted to it Keep track of your time work out how long it takes to do activities in your natural state to enable you to have accurate time allocated to complete a task and aim to beat it Avoid the temptation to over schedule your day Schedule reactionary time to enable you to complete any unexpected issues Include some time to think by yourself Andrew Carnegie sent Napoleon Hill of Think and grow rich fame to interview billionaires of the time He discovered one of the keys to success was sitting for ideas ensuring that you remove distractions Jeff Weiner CEO of LinkedIn schedules do nothing time on his calendar He creates a 90 minute and a two hour buffer in his day where he keeps no meetings no calls and no one can even disturb him during this time This gives him enough time to think and do his job well You could use an app like Freedom to help block out other distractions Find your peak performance schedule What is your genetic sleep chronotype Take the Power of sleep quiz to work out whether you are a Wolf Lion Bear or Dolphin Research the ideal schedule for your chronotype This can help you work out when your body likes to sleep eat and operate Jeff Bezos spends his mornings pottering as this suits his chronotype Whatever your chronotype you ll need to get a good night s sleep Working overtime will make you tired and stressed and negatively impact your productivity Getting enough sleep will help you to ensure good physical and mental health Bill Gates said that he needs seven Jeff Bezos nine and Elon Musk between six to seven hours of sleep every night Make decisions quickly including correcting bad decisions As Jeff Bezos told his shareholders Most decisions should probably be made with somewhere around 70 percent of the information you wish you had If you wait for 90 percent in most cases you re probably being slow Making the right decision can sometimes be less important than making a quick decision The Amazon founder bases this assumption on the fact that most decisions are reversible To ensure optimal levels of productivity one needs to also be quick about correcting bad decisions Mistakes are inevitable in life and to grow we need to not only seek mistakes but also learn from them as quickly as possible Have a place to store your ideas Our minds are best for processing information rather than remembering Richard Branson the Virgin Group founder notes down everything from ideas suggestions feedback and contact details He feels it helps to increase productivity levels Know when to say no Throughout their careers Warren Buffet and Steve Jobs followed the principle of knowing when to say no Steve Jobs famously said Focus means saying no to the hundred other good ideas Warren Buffet agreed saying Really successful people say no to almost everything Working hard is important but what s more important is how we can optimise our potential by working smarter Sheshan Wickramage and Wick Financial Pty Ltd are Authorised Representatives of Lifespan Financial Planning Pty Ltd AFSL 229892 Suite 544 44 Lakeview Drive Scoresby VIC 3179 M 0430 420 005 E sheshan wickfinancial com au W wickfinancial com au Disclaimer The content in this newsletter is of a general nature only and are not to be taken as recommendations as they might be unsuited to your specific circumstances The contents herein do not take into account the investment objectives financial situation or particular needs of any person and should not be used as the basis for making any financial or other decisions Your Lifespan adviser or other professional advisers should be consulted prior to acting on this information This disclaimer is intended to exclude any liability for loss as a result of acting on the information or opinions expressed