In October global market uncertainty was back. The Australian market as measured by the S&P/ASX 300 Accumulation Index fell 6.2 % during the month, and the MSCI World Net Total Return Index in Australian Dollars, a measure of global markets, declined 5.4%.
The main reasons cited for this pull back have been market concerns over the trade war between China and the US, and the rise in US interest rates which makes the US stock market less attractive.
You may have seen alarmist headlines in the newspapers about the size of these falls but these kinds of market moves are nothing new, they are simply part of the nature of markets. Over my long career in global markets I have seen many a pull-back or as they are often called a ‘correction’. This comes with the territory of investing in markets. It pays to keep in mind that the Australian Market is still up 2.94% compared to this time last year and global markets (as measured by the MSCI World Index ex Australia in Australian Dollars) are up 9.6% compared to this time last year.
Is this part of something deeper? Trying to accurately predict a significant market correction is virtually impossible. What is most important during times of uncertainty is that you stick to your fundamentals of investing:
- Have a diversified portfolio of many types of assets – cash, fixed interest, property and shares (both Australian and International). A mix of defensive assets and growth assets protects you when market conditions change.
- Make sure you have enough investment time frame to ride out any pull-backs in markets. Stock markets fundamentally go up more than they go down, which is what makes them a great investment over the long term. The ability to ride out down turns without panicking is the essential characteristic of a great investor and is what produces superior investment returns over the long term.
Keep in mind my favourite quote from my all-time favourite investor Warren Buffet: “Be fearful when others are greedy and greedy when others are fearfull”.
If you would like to talk to me about this or your own financial circumstances please contact me here.
This information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. It does not represent and is not intended to be personal advice. Because of this, you should consider whether the information is appropriate in light of your particular objectives, financial situation and needs. We strongly suggest that you seek professional financial advice before acting.