What's Going On?

What's Going On?

By Dominic Hefferan on Mar 22 2018


The economy's been in the news a lot lately, with the Dow Jones in America losing over a thousand points in a single day in early February. That sounds bad, but what exactly does it mean for us over here? While there's always a level of unpredictability in markets, there are a few things we can be reasonably sure of, so let's take a closer look at what's going on.


What Is All This?

First of all, let's all get on the same page. When we say "Dow Jones", we're talking about the Dow Jones Industrial Average, which is essentially a day-to-day scoreboard of how 30 major corporations (such as Microsoft, Coca Cola, etc.) have traded that day.

On 6th February, this index fell from 25,521 to 24,346 points, a 4.6% loss1 overall. In turn, the ASX 200, Australia's equivalent to the Dow, lost 1.9% the next day, however both the US and Australian markets began to show signs of recovery shortly after.


Will There Be A Crash?

Though it's impossible to predict the future, most commentators agree this won't lead to a crash. The GFC followed a Dow Jones plunge of roughly 7%,1 whereas this was a drop of only 4.6%, and this came on the heels of unprecedented levels of ongoing market growth, leading most to consider it a "correction" back to more realistic standards.

Also, though Wall Street is still seeing some unpredictability, Australia is at least somewhat removed from its effects, seeing relatively strong growth in recent days.2


What About Property?

The Australian property market is largely unhurt by all this. Just a few days after the recent plunge, RBA Governor Philip Lowe confirmed there were no plans to raise Australia's historically low interest rates, saying at a recent forum that the RBA "does not see a strong case for a near-term adjustment".3

Also, as ABC Business reporter Stephen Letts noted, "Overall, Australian housing is marching to an entirely different beat to global shares"4 and with American volatility tending not to reach Australian shores, there's no need to start panicking.


It's always important to stay up-to-date on what's happening, but at the same time you don't want to panic. By its nature, the stock market deals with large, general trends, whereas individuals can still get a great result in any economy.

Of course, if you want to know more about what's best for you, you can always get in touch with us for a free, confidential consultation on your best options.


Footnotes

1 Chau, D., 2018, "Dow Jones plunges 1,175 points as Wall Street bloodbath intensifies",
abc.net.au/news/dow-jones-falls-over-1000-points

2 Chau, D., 2018, "Wall Street lifts on subsiding interest rate concerns, ASX to open higher",
abc.net.au/news/wall-street-lifts-subsiding-interest-rate

3 Lowe, P., 2018 "Remarks to A50 Dinner",
rba.gov.au/speeches/2018/sp-gov-2018-02-08

4 Letts, S., 2018 "You asked what the Wall Street wipe-out meant for you — we answered",
abc.net.au/news/wall-street-your-questions-answered


References

Martin, P., 2018, "I won't be pushed to push up rates, says RBA governor Philip Lowe",
smh.com.au/business/the-economy/i-won-t-be-pushed-to-push

Wade, M., 2018, "RBA more relaxed on housing, next rate move some way off",
smh.com.au/business/the-economy/rba-reiterates

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