Markets spooked as oil leads commodity crash
What a start to 2016! With a change in calendar year, came a change in investor sentiment - sparking a large sell off in the markets.
There is no sign of a recession on the horizon for the US, Australia, China or globally. There is no collapse in the banking and payment system like there was in 2008.
Which leaves us with a fall driven by a changing sentiment. Investors appear to think that stocks were overvalued and needed to come down. The oil price along with news out of China were the catalysts for the sell.
To panic or not to panic? That is the question.
- sponsor - Wealth Know How
Wealth Know How is the online network helping people manage their wealth through financial education. Whether you are looking for simple ways to better manage your cash, or you are after a complete strategy on how to save for retirement, we can help you understand your options. It is important to have a vision for your future, but its knowledge not dreams that will ultimately deliver financial success.
Published on 19 Jan 16
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What a start to 2016! With a change in calendar year, came a change in investor sentiment - sparking a large sell off in the markets.
There is no sign of a recession on the horizon for the US, Australia, China or globally. There is no collapse in the banking and payment system like there was in 2008.
Which leaves us with a fall driven by a changing sentiment. Investors appear to think that stocks were overvalued and needed to come down. The oil price along with news out of China were the catalysts for the sell.
To panic or not to panic? That is the question.Sponsor - Wealth Know How
Wealth Know How is the online network helping people manage their wealth through financial education. Whether you are looking for simple ways to better manage your cash, or you are after a complete strategy on how to save for retirement, we can help you understand your options. It is important to have a vision for your future, but its knowledge not dreams that will ultimately deliver financial success.
-
Venezuela tension heats up
Duration 03:16
-
Aussie dollar surprises market
Duration 03:10
-
Markets climb as investors watch US healthcare bill
Duration 02:31
There is no sign of a recession on the horizon for the US, Australia, China or globally. There is no collapse in the banking and payment system like there was in 2008.
Which leaves us with a fall driven by a changing sentiment. Investors appear to think that stocks were overvalued and needed to come down. The oil price along with news out of China were the catalysts for the sell.
To panic or not to panic? That is the question.
There are a few reasons you might choose to worry about oil. The main one being that Oil producing countries will do it rough. Social unrest is possible as governments cut back spending. In fact, some of the recent volatility could be due to sovereign wealth funds in these countries selling assets.
You may choose to remain calm in the knowledge that lower oil prices should boost growth in the majority of countries that are net importers of energy. The current oversupply of oil should be worked through eventually as demand for oil continues and maybe even increases due to lower prices.
China is the second catalyst for concerns as there are fears that Chinese regulators have lost control of their markets and the currency. This could cause more market unrest if proven true.
Or again you can take a more relaxed view that the market is focused on the data that paints a picture of slowing growth, and is ignoring data that shows an environment of stabilisation. Also the fall in the Chinese stock market in August did not have an impact on consumer spending, and the service sector remains healthy.
We think volatility in markets will continue for a while, probably taking several months to dissipate.
Although it’s not a great way to start the year, we think it unlikely that recent falls will hit the real economy.
Unlike shares, commodities eventually need to be bought to satisfy demand, so the crash we see in commodities will stabilise. We just have to wait for sentiment to swing.