At time of writing, the ASX 200 is down 2.11% today, trading at 5706.2.
This marks a steep decline from the ASX’s highest close for the year of 6352 on August 29.
Here’s a quick guide for understanding the drop:
US markets have been selling off. Global sentiment is often a big factor for the ASX and it appears the risk-off mood in the US is contagious.
Tesla stock however will potentially escape the carnage over the coming days after it reported a surprise Q3 profit.
Europe’s economy impacts the ASX
Eurozone worries also had an effect. The Euro fell again to a two-month low against the USD of $1.14 after weak PMI data was released, showing a composite decline to 52.7 from 54.1 in September. We talk about the importance of PMIs here.
The pain in Europe was compounded by fresh worries about Italian debt; the European Commission recently rejected the Italian budget — the first time this has ever happened.
You can find out about how Italy’s budget could destabilise the world economy here.
Continuing concerns about the Aussie property market and the prospect of a credit crunch are also weighing down sentiment on the ASX.
As CommBank economist Gareth Aird explains:
‘The housing market remains the key domestic risk for the Australian economy… if price falls were to accelerate there is a risk that there is a negative spill-over to consumer spending and employment growth.’
As covered previously, these price falls could accelerate as auction clearance rates decline.
What to do in a falling market
What does all this mean for Aussie investors?
A couple things.
First, it means you might need to look at adjusting your portfolio to take advantage of gains in sectors you don’t normally think about.
As Terrence Duffy explains, this could mean gold stocks.
Secondly, you might need to do some extra research on lower risk options for your portfolio.
For Market & Money
PS: If you want to protect your family’s wealth, we have a free report on 2018’s looming financial crisis, which includes the steps you need to take. Download the free report here.