After 12 months of strong growth, global sharemarkets hit turbulence in February, with 11 per cent coming off the value of the US market in just over week. The impact on the Australian market was only half of that.
The headlines roared ‘$50 billion wiped off ASX’ but, in reality, the markets simply went back to where they were in November 2017. To paraphrase Mr Keating: this was the pullback markets had to have. What happens next? Fundamentally, the global economy is running along nicely, inflation, interest rates remain low (for now), and Trump’s tax package is stimulatory for US companies, although this appears to be already priced in. Improved global economic growth usually serves as a tailwind for emerging markets and indeed equities in general. Overall, the markets needed the breather and more volatility may follow in the coming months, so diversification and astute asset allocation remain our friends.