Current Market Volatility

Happy New Year and I hope this email finds you well.  With market volatility back in the news headlines over the last week we have prepared the attached update for clients based on the research notes and commentary we have been receiving, to provide some perspective to the current volatility that is occurring in the markets which is a continuation of the issues from China and with the Commodity prices (oil especially) which started during the 2015 year.

The past few weeks have seen increased volatility and sell offs across the share markets both here in Australia and Globally:

  • Financial markets have started the year on a rough note as last year’s worries about China and global growth in the face of US monetary tightening continue.
  • This could drive more short term weakness. However, in the absence of US/global recession, which still seems unlikely, it’s hard to see a GFC style bear market.
  • The key for investors is to recognise that shares offer a higher return potential after sharp falls, selling after big declines just locks in a loss and that dividend income from a well-diversified portfolio is little affected by share market volatility.

For our self funded retiree clients and accumulation clients I remind everyone that growth investments have two return elements, the income returns or dividends which are paid out to help fund lifestyle are yielding around 6% on the share market at the moment as well as the franking credit benefits, and then the capital return which often attracts all the attention as it moves day to day in the listed markets and will make good headlines for those who are selling the news.

We have been cautious with client portfolios over the last few years ensure that people are diversified across different sectors and asset classes and have a good cash buffer in their overall approach to ensure you can ride through these periods as smoothly as one can.

Our expectation based on the underlying market and economy fundamentals is that this isn’t another global financial crisis event, however as an investor the guiding principals still stand around having a diversified portfolio across a range of investment classes and a mix of Defensive (Cash, Fixed Interest) and Growth (Shares – Australian and International and Property) based investment across both listed and unlisted markets is a key to a successful long term portfolio approach.  The percentage you have into the Growth or Defensive assets classes will depend on where you are at in life and your income requirements from your portfolio.

The following link is an article which has recently been published by Dr Share Oliver, Chief Economist from AMP Capital Investments.
As always if you have any questions with regards to your current arrangements please do not hesitate in contacting me at the office 1300 772 643.

The information provided on this article is of a general nature only. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information you should consider its appropriateness having regard to your own objectives, financial situation and needs.