Post by Fletchsmile on Aug 25, 2015 20:48:58 GMT 7
Brief but to the point
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My view on what the recent market sell-off means for investors
Mark Dampier | 25 August 2015
Recent stock market jitters seem to have been caused by a sell off in the Chinese equity market and a relatively modest devaluation of the Chinese currency.
Any long term or even short term chart would show the volatility of the Chinese stock market. It went up like a rocket in the first half of this year, so perhaps it is hardly surprising to see it has given much of this gain back. It has certainly not been helped by clumsy Chinese government intervention in trying to stabilise the market, which has made the situation worse by not allowing the stock market to find a natural level.
This has spilled over into the developed markets because, in a global economy, worries tend to reverberate around the world.
What does this all mean for investors?
It suggests there is no possibility of a rise in US interest rates this September, nor December, in my view. I feel this would be a policy error and until it is clarified, market uncertainty may persist. What we are witnessing though is a broader emerging markets issue, while some developing economies also devalue their currencies to offset the problems in their own countries.
There is an oversupply of commodities against global demand, which is flat at best. This will be good in due course for the developed world as falling oil prices will feel like a tax cut for many consumers. I don’t think we are far away from seeing 100p a litre for petrol and diesel.
I believe it also shows we are perhaps still only halfway through the financial crisis, which started in 2008. Back in 2009, I termed what we are experiencing as the ‘long middle’ – a time where we can expect to see a lasting period of lower global growth and inflation as well as low interest rates.
However, this is not the end of capitalism, the end of the world or anything else but merely another painful corrective stage. In this type of environment, I believe investors should avoid companies with high borrowing and also attempt to steer clear of high debt levels themselves. Instead, look for companies with excess cash they can distribute to shareholders and businesses more in control of their own destiny. Most importantly, take a long term view and be mindful of the risks.
www.hl.co.uk/news/articles/my-view-on-what-the-recent-market-sell-off-means-for-investors
===================================================
My view on what the recent market sell-off means for investors
Mark Dampier | 25 August 2015
Recent stock market jitters seem to have been caused by a sell off in the Chinese equity market and a relatively modest devaluation of the Chinese currency.
Any long term or even short term chart would show the volatility of the Chinese stock market. It went up like a rocket in the first half of this year, so perhaps it is hardly surprising to see it has given much of this gain back. It has certainly not been helped by clumsy Chinese government intervention in trying to stabilise the market, which has made the situation worse by not allowing the stock market to find a natural level.
This has spilled over into the developed markets because, in a global economy, worries tend to reverberate around the world.
What does this all mean for investors?
It suggests there is no possibility of a rise in US interest rates this September, nor December, in my view. I feel this would be a policy error and until it is clarified, market uncertainty may persist. What we are witnessing though is a broader emerging markets issue, while some developing economies also devalue their currencies to offset the problems in their own countries.
There is an oversupply of commodities against global demand, which is flat at best. This will be good in due course for the developed world as falling oil prices will feel like a tax cut for many consumers. I don’t think we are far away from seeing 100p a litre for petrol and diesel.
I believe it also shows we are perhaps still only halfway through the financial crisis, which started in 2008. Back in 2009, I termed what we are experiencing as the ‘long middle’ – a time where we can expect to see a lasting period of lower global growth and inflation as well as low interest rates.
However, this is not the end of capitalism, the end of the world or anything else but merely another painful corrective stage. In this type of environment, I believe investors should avoid companies with high borrowing and also attempt to steer clear of high debt levels themselves. Instead, look for companies with excess cash they can distribute to shareholders and businesses more in control of their own destiny. Most importantly, take a long term view and be mindful of the risks.
www.hl.co.uk/news/articles/my-view-on-what-the-recent-market-sell-off-means-for-investors
