As global share markets moved sharply lower yesterday (a fall of 7.1% in the all ods), Australia’s Treasurer Wayne Swan moved to reassure investors. After hearing Wayne I slept easier last night. Moreover the market obviously responded well to the sage words of the Labor Party’s economics guru – it bounced backed 4.3% today.
Swan’s helpful suggestions for reducing the cost of living fortified me during the last election campaign so I know he is on top of things!
It was a large market correction yesterday and something of the typical Australian market overreaction – we are better placed to weather shocks than the US. Our credit markets are in better shape and we will retain strongly growing export markets in raw materials and food.
I didn’t want to trade yesterday but I did want to look at the market. Too bad for other ComSec users since their webside went caput – it was still not functioning properly late last night. The same thing happened the last time there was a market slide – hardly comforting for ComSec’s customers!
I was intrigued by comments in The Australian and elsewhere about the terrible day share brokers had because of the price falls – they were ‘shell shocked, exhausted and depressed’. This seems doubtful though they were probably busy – the brokers do well on any day with high turnover which yesterday certainly was. The Age also described events as a ‘market failure’ – the ignorance of these journalists and sub-editors knows no bound.
Yesterday's events are probably the first phase of a bear market but I think the sell-off was very overdone. The US economy is still quite strong despite the bad press. Of course with enough pessimism a recession can become a self-fulfilling forecast. It is a worry.