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Investor Focus: Separating the facts from the headlines – a quick update for investors Posted on October 9, 2018
The US stock market continues to make history with the Dow Jones index now registering four days in a row of 400-plus moves in either direction. It’s never happened before and so we have to expect the unexpected when it comes to volatility.
This month our investment team “filters out the noise” to de-clutter the headlines and provide some facts.
The market is jumping on rumours and buying or selling with panic, this is the current state we are in and we expect this to continue for at least a matter of weeks.
To assist you in understanding where markets are at and what to expect over the coming weeks, we have collated the following expert opinion and refer you to our website for the full article.
Perennial Investment Partners write;
Global financial markets are clearly driven by uncertainty at the moment around some key important issues.
Firstly, we have the uncertainty around whether the heavily indebted nations of Greece, Ireland, Italy, Portugal and Spain will in fact create larger problems for Europe and European banks. While the rescue package for Greece announced a couple of weeks ago didn’t seem to quell markets, the European Central Bank’s pledge on 7 August to buy large quantities of bonds issued by the countries struggling with debt issues was seen as a positive move.
Secondly, the uncertainty around the extent of the slowdown in the US economy that has been present for some months was exacerbated by S&P’s decision to downgrade US Government debt on 6 August from AAA to AA+. As I write this, US markets have bounced on the news that the US Fed will keep interest rates low and that they are prepared to look at other measures to support the economy.
What does history tell us?
Since WW2 there have been four falls in the S&P 500 of 9.5% or more in a 10 day period – this week we saw the fifth. In the past, six months after every fall of this magnitude, the market was up again.
The Australian Market
Paul Taylor from Fidelity Australian Equities writes;
‘The Australian market, because of this volatility, is now sitting on a very attractive valuation level of around 10 times earnings and about a five percent dividend yield.
Now that’s very attractive from both an absolute valuation level and also against Australia’s own historic levels. So the market is looking really attractive at the moment.’
‘So for the Australian market, which I think is actually a structural growth market with a lot of really solid fundamentals and solid underpinnings, I think you’re actually going to see pretty good growth opportunities over the next few years. Actually picking the Australian market up at 10 times earnings, five percent dividend yield is a really good long-term investment opportunity.’
So what does all that mean?
Here at Robson Partners, our advice for investors is to focus on the long term market and long term fundamentals.
For those clients currently in the equity market, we see no value in selling and moving to cash, in the short term, you may potentially be getting out at the bottom.
For clients who currently have cash available this perhaps would be a time to consider dollar cost averaging these funds into the market over the next 3 months to pick up some opportunities that may not be around for a long time.
It is always important to continually monitor your portfolio and review its position and allocation.
Should you wish for us to review your current investment portfolio, please contact us to arrange a time.