THE PULLBACK IN SHARES:
SEVEN REASONS NOT TO BE TOO CONCERNED
By James Milliaros
For this edition of our Weekly Email, we’ve attached an article from Shane Oliver, Head of Investment Strategy and Chief Economist at AMP Capital.
You may have seen or heard form Shane previously as he is a regular media commentator and presented at one of our client seminars a couple of years ago.
We think that Shane’s explanation on the current financial market volatility in the latest edition of his newsletter is very insightful.
Last week was a roller coaster week for markets as volatility roared back to life following fears of heightened inflation and rising bond yields in the US.
The S&P/ASX 200 finished the week down 4.6% following other global markets lower. Energy was the worst performing sector down 8.7% and Real Estate the best, down only 3.1%.
Wall Street was down 5.1% for the week (which included a day of a 1,000 point drop), its worst loss in more than two years. However on a positive note the Dow Jones recovered some of the losses last Friday, up 1.4% after rallying hard late in the day to finish more than 4% above its intraday low.
In his article, Shane writes that the volatility may continue and although we may have seen the worst, his view remains that it’s just another correction in a rising market.
He also reminds investors to bear in mind that:
- corrections in the order of 5-15% are normal,
- in the absence of recession, a deep bear market is unlikely,
- selling shares after a fall just locks in a loss,
- while shares may have fallen, dividends haven’t
- share pullbacks provide opportunities for cashed-up investors to pick them up more cheaply, and
- sometimes it’s just best to turn down the noise during times like the present and stick to your longer term investment strategy.
If you have any questions or comments, please email me at firstname.lastname@example.org
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