Whilst there has been market volatility which is clearly outlined below, the fundamentals in Australia are still very strong in that we are experiencing minimal inflation, unemployment is low, interest rates are low. The market is now below the 15 times value which it has traditionally traded at, and company profits generally have been strong.
These sudden market downturns should be a strong reminder about investment fundamentals such as, you will you will only crystallise a loss if you are too reactive and move from your existing structure by selling. The Australian share market has averaged over 11.5% since 1901 and we wont expect that to change in the short term.
The last few weeks - and especially the last few days - have seen an extraordinary level of instability and volatility in global financial markets – especially in equities and some emerging market (EM) currencies.
Key factors behind the market volatility
Much of what has taken place in global financial markets in recent days/weeks has been driven by fresh concerns over the pace of growth in China and further volatility on Chinese equity markets. Chinese policy makers appear to be prioritising the slowing economy and stabilising the currency over protecting the equity market – as a result of the apparent lack of immediate policy action on the latter, the Chinese equity market continues to fall sharply and this has led to falls in global equity markets. There have been no other signs of a broader global economic slowdown.