Should we refrain from value hunting in a falling market?
Team Veye | 02-Mar-2020
This week, Coronavirus panic further tightened its grip on global markets as the escalating outbreak drove stocks to their worst weekly loss since the 2008 financial crisis. Is it no longer an outbreak with a billion people in quarantine and is a pandemic, that it is now in 50 countries?
The virus has put pressure on businesses and supply chains around the world. The global stock market plunged to its worst loss in almost nine years and investors worldwide grew increasingly fearful that the outbreak could cause a recession as it squeezes corporate profits.
When many countries were realizing that sending all manufacturing to China was not a good idea, the Volatility Index, known as the VIX, surged to its highest level since the Great Recession, signaling to investors that more volatility could be ahead.
Do the falling stock markets offer an opportunity?
Investors in the stock market are generally known to follow the crowd. If prices are going up, the kneejerk reaction is to go and buy and if prices are falling, this causes panic and people often rush to get out before prices fall too far. This induces further to fall. However, the best course of action is to let the long-term growth take place
Just because the market has fallen over the course of a few weeks should not derail your long term investment plans. One should be aware that such downturns are not abnormal. Without getting impulsive, this could be the time to revisit your investment decisions, rebalance your portfolio and revisit your asset allocation.
As the markets have fallen too fast too soon it appears to be heading towards the oversold area. The risk-reward ratio may also be turning favourable.
Already there have been calls for the Federal Reserve to cut interest rates and with talks of US dropping interest rates very low, even talking about negative interest, the global markets could see a boost.
Veye Pty Ltd(ABN 58 623 120 865), holds (AFSL No. 523157 ). All information provided by Veye Pty Ltd through its website, reports, and newsletters is general financial product advice only and should not be considered a personal recommendation to buy or sell any asset or security. Before acting on the advice, you should consider whether it’s appropriate to you, in light of your objectives, financial situation, or needs. You should look at the Product Disclosure Statement or other offer document associated with the security or product before making a decision on acquiring the security or product. You can refer to our Terms & Conditions and Financial Services Guide for more information. Any recommendation contained herein may not be suitable for all investors as it does not take into account your personal financial needs or investment objectives. Although Veye takes the utmost care to ensure accuracy of the content and that the information is gathered and processed from reliable resources, we strongly recommend that you seek professional advice from your financial advisor or stockbroker before making any investment decision based on any of our recommendations. All the information we share represents our views on the date of publishing as stocks are subject to real time changes and therefore may change without notice. Please remember that investments can go up and down and past performance is not necessarily indicative of future returns. We request our readers not to interpret our reports as direct recommendations. To the extent permitted by law, Veye Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss, or data corruption) (as mentioned on the website www.veye.com.au), and confirms that the employees and/or associates of Veye Pty Ltd do not hold positions in any of the financial products covered on the website on the date of publishing this report. Veye Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services.