Date: February 27th, 2020
As you are no doubt aware by now, the Australian stock market is currently experiencing a downturn. If you recall my email from the 13th of Feb which was 7 days prior to our market hitting the highest point it has ever been in our history, this fall was not unexpected. In fact of the three potential triggers I noted in my update ie the fires, floods or virus, it was ultimately the virus that tipped the scales.
So the question I’m being asked now is where to from here? In that earlier email I suggested that if it was indeed the virus that triggered the turn then we could expect a drop in market value of between 5 – 15%. At it’s high the XJO or Australian 200 reached 7,197pts so, if we consider the lowest number we’ve hit today being 6,629pts then we’ve experienced roughly a 7.9% drop so far. Is this the market correction I’ve been waiting for? no, not at this number but it could be the start. If we were to drop the full 15% then we’d be down around 6,100pts and this would represent a correction.
Some of you may have noticed buying activity on your accounts. This is to take advantage of the reduction in investment values to either buy more of what you already hold or to actually enter the market. This is happening across a few days because while I do expect the market to continue it’s downward trend it could just as easily reverse on evidence that the spread of the virus has been contained.
Should you be concerned? No, while we will absolutely experience a knock on effect of the virus impacting various sectors, I still feel that the economic disruption caused by the fires and floods will weigh heavier on our economy and this will bring more focus on the poor unemployment and wage growth numbers. This will invariably keep investment results down this year but coming off this lower base will be a very good thing going further forward.