Global market drop-off could be buying opportunity

Yesterday, investors saw “a sea of red across all major indices worldwide,” following “Wall Street’s worst day in months,” says deVere Group CEO Nigel Green in a Thursday release. 

“The U.S. Dow Jones fell 830 points, the U.K.’s FTSE is in market correction territory [after] hitting a six-month low, European markets hit a 20-month low, and in Asia, the Nikkei fell 4%, amongst other major indices also falling,” the release says. 

In North America, CNBC reports, “332 of the S&P’s 505 components—or 66% of the index—had fallen by 10% or more from their 52-week highs,” while Baystreet.ca reported the S&P/TSX Composite fell nearly 340 points or 2.1%, driven partly by declines in energy stocks.

Today likely won’t be any better. Both the S&P/TSX Composite and S&P 500 continued to dip as of mid-morning: Canada’s index had fallen more than 400 points since market close on Oct. 9, and the U.S. index had slipped more than 100 points.

Investors may not be surprised, however, says Green. He attributes the global market readjustment to factors such as rising interest rates, contracting labour markets and rising oil prices. He also cites rising bond prices and, of course, trade tensions.

With all that in mind, he says, “this readjustment was all to be, to some degree, only a matter of time.” It could also present “one of the last key buying opportunities of the year.” 

Still, “This latest sharp global sell-off should serve as a timely reminder for investors to ensure that their portfolios are properly diversified across assets, sectors and geographical regions,” Green says. 

Also read:

• How portfolio managers use ETFs
• Portfolio effects of changing monetary policy

This week’s market drop-off coincides with the International Monetary Fund downgrading its outlook for the world economy. It also made note of rising interest rates and growing tensions over trade, reported The Associated Press.

The IMF said Monday that the global economy will grow 3.7% this year, the same as in 2017 but down from the 3.9% it was forecasting for 2018 in July. It slashed its outlook for the 19 countries that use the euro and for Central and Eastern Europe, Latin America, the Middle East and Sub-Saharan Africa.

The organization expects the U.S. economy to grow 2.9% this year, the fastest pace since 2005 and unchanged from the July forecast. But it predicts the pace will slow to 2.5% next year as the effect of recent tax cuts wears off and as President Donald Trump’s trade war with China takes a toll.

The IMF also kept its forecast for growth in the Chinese economy unchanged, at 6.6% this year. But it did shave that outlook next year to 6.2%, which would be the country’s slowest growth since 1990.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.