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January 2018 Market Wrap

The Australian share market made a flat start to the 2018 calendar year, with the All Ordinaries index closing the month 0.3% lower at 6,146.50 points. The Australian Dollar continued to rally throughout January, gaining 3.4% in the month, with 1 Australian dollar currently buying 80.65 US cents.

The Reserve Bank of Australia (RBA) board did not meet in January. The first RBA board meeting for 2018 is scheduled for next Tuesday the 6th of February, with it widely expected for the official Cash Rate to remain on hold at 1.50% per annum.

Global share markets returns were very mixed in the month of January. The United States Dow Jones index gained 5.8%, the London FTSE fell 2.1%, the Japan Nikkei 225 gained 1.5% and the Hong Kong Hang Seng Index gained 9.8% for the month.

Just prior to Christmas, several friends and clients were interested in my views of Bitcoin and other so called "cryptocurrencies". It is fair to say that at the time I was sceptical about the prospect of investing in cryptocurrencies (noting the extreme price volatility and unregulated nature of cryptocurrencies as key concerns).

However, when an investment (and I use that term loosely in terms of cryptocurrencies) increases more than 10x in a calendar year, it is human nature to think that you are "missing out" by not investing. Unfortunately, this leads to a state of "euphoria", and historically is the worst time to invest.

The chart below has been widely used in the wealth management industry for several years to demonstrate the "cycle of investor emotions". While it is dated, it is an excellent reminder to all investors to be cautious and opportunistic when it comes to investing.

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For what it is worth, Bitcoin has fallen about 29% in the last month as United States regulators ramp-up their scrutiny of one of the world's largest digital currency exchanges.

For more information, please contact Ryan Love on 1300 856 338.

This article is general information only and is not intended to be a recommendation. We strongly recommend you seek advice from your financial adviser as to whether this information is appropriate to your needs, financial situation and investment objectives.