Rising US interest rates, trade wars, the US midterm election results, etc – should investors be worried?
October was a bad month for shares with global shares losing 6.8% in local currency terms and Australian shares losing 6.1%. It’s possible that following top to bottom falls of 9% for global shares, 11% for Australian shares, 21% in emerging markets and even 31% in Chinese shares we have now seen the low in the share market rout. Shares were due to a bounce and from their October lows and Australian shares have risen around 4%. But it’s impossible to be definitive and with the worry list around US interest rates, trade, politics, etc, there could still be another leg down.
- It’s still too early to be sure that last month’s pullback in shares is over but we remain of the view that it was not the start of a deep bear market and that the trend in shares remains up.
- Worries around US interest rates, trade wars, European politics etc are unlikely to be terminal.
- The US midterm election turned out pretty much as polls indicated. Since 1946 US shares have rallied in the 12 months after all midterm elections.
However, our view remains that recent turbulence in share markets is a correction or a mild bear market at worst (like 2015-16) rather than the start of a deep bear market like the global financial crisis. This note reviews the key recent worries for shares and why they are unlikely to be terminal.
If you have questions about this or other financial planning related queries, please contact us.