Preparations for Market Volatility
An Australian based news site, The Daily Telegraph, published an article discussing the extreme volatility that can be expected in 2008 as global markets try to overcome the subprime mortgage crisis. The following is an excerpt from the article:
Trading began the week on a positive foot, but as the Citigroup news which forced its boss Charles Prince to step down filtered through, world markets slid, with Hong Kong’s Hang Seng the hardest hit, falling 3 per cent.
CommSec chief equities economist Craig James said the downturn was the first pothole in a potentially bumpy week on the local market.
The volatility will climax with the Reserve Bank’s decision on interest rates tomorrow morning, with all indicators pointing to another increase.
“It is by no means going to be smooth sailing this week and we have seen that today, the potential for significant volatility,” he said.
Colonial First State chief equities analyst Hans Kunnen believes there is a mountain of short-term risk for Australian investors, but greener pastures await just over the hill.”Given the pace of the market in the last two months, I keep telling people there are short term risks, but my take on the market in the medium term is that I’m not concerned,” he said.
“But at the moment we have to be prepared for volatility.”
It seems to be a widely accepted belief that the upcoming months will be a rollercoaster ride for global markets. But if everyone can just sit tight and not overreact at every dip in the market, we stand a greater chance of overcoming this crisis and finding a way to payoff mortgage debt..
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