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Nigel Stevenson
Senior Financial Planner
Court Financial Services
Thursday October 16th 2008
(Black) Friday October 10th was the worst day on the Australian and global markets since October 1987. The US market experienced its biggest ever weekly loss in history.
By Monday, unified actions taken by the US and European governments and the worlds leading central banks had restored some confidence. Globally the markets rallied.
Monday & Tuesday’s Australian market gains were the largest seen for over a generation. The US markets enjoyed an 11% rebound and the Dow Jones recorded its sharpest percentage rise since 1930. By the end of Tuesday, most of Black Friday’s losses were reversed.
After a month of turmoil, this turnaround was great relief however we are far from full recovery. By Wednesday, the relief rally came to a halt as concerns about the US recession and global slow downs escalated.
The financial crisis has had widespread ramifications. It is too early to make a call on whether (or how quickly) rescue plans will manipulate economies sufficiently enough to avoid (or at least dilute the severity of) anticipated recessions, and reignite sustained gains on global share markets.
The events of the last month have created a new and very significant chapter in share market history. Although we are now in unchartered water, we can still be reassured by the fact that markets have always recovered. In this current case, there has been a unified effort by governments and central banks to stabilise the economy and further interest rate cuts are likely. The argument for staying in the market (ie. resisting the move to sell) remains relevant and strong. A long term view and patient approach is key.
Q: Should I be selling my shares to minimise the impact of negative performances?
A: Selling shares now could result in missing out gains later on.
If the value of your share investments have fallen, you have currently only made a loss on paper. If you sell your shares, you make the losses real and irreversible. If you hang on, a rise in prices could soon return the value of your investment without you doing anything.
Q: Has the market reached a low and if so should I be buying now?
A: No one knows for sure whether share prices have factored in the full extent of the financial crisis. While volatility in the market is likely to continue, opportunities do exists as some stocks are currently considered to represent good long term value. Whether youíre in a position to buy at this time depends on your cash flow, risk profile and investment objectives. It is important to consider that you may need to endure further volatility and or decline in the market before you experience a profitable outcome. If you are interested in making further investments at this time, please contact me to review your investment strategy and risk profile so that we can ensure decisions and selection of stocks are well considered.
Q: What is Court Financial Services doing in response to investment market performance?
A: In times like these, we realise that our customer rely on us for guidance and we take our responsibilities very seriously. While we draw on our experience, research and knowledge to reassure our customers and form views, our approach to investing remains the same; Thoroughly considered decisions and strategies are made based on individual needs, risk profiles, goals and long term plans. Investments are made with a long term view and diversification always plays a key role. As normal, we periodically re-balance portfolios, however we do not dip in and out of the market to make quick profits. We are continually monitoring investment performances and aim to keep customers up to date. We are here to answer questions, and talk through your individual options if you are particularly concerned or if your needs and investment risk profile have changed.
Conclusion:
Keep the long term timeframe of your financial plan top of mind. If your risk profile, objectives and investment time horizon has not changed, then there is probably no need to alter your strategy. If it has, please contact me to talk though your options.
Otherwise, look forward to the benefits of stronger market performance when it inevitably returns.
Note: Before making any investment decision, you should seek assistance from a Financial Advisor and consider whether the information is appropriate for your personal situation. Court Financial Services Pty Ltd is a Corporate Authorised Representative of Australian Finance Group Financial Planning Pty Ltd ABN: 74 099 029 526 AFSL: 247105
