What’s happened so far in 2016

Let’s have a roundup of the financial news we have received in 2016 so far:

–          The Royal Bank of Scotland warned of a ‘cataclysmic year’ and told its clients to ‘sell everything except high quality bonds.’

–          Billionaire trader George Soros advised of paralells between early January sharemarket drops and the 2008 financial crisis.

–          The Australian sharemarket has dropped over 6% already, the US over 7% and Germany over 10% down on the year.

Why the recent gloom?

With growth in China slowing, and policymakers showing they have little impact to control growth rates, the ripple effects are expeding to the global economy.

So where to from here?

With so many different factors  that can cause the price of a share to rise and fall; from company news and performance, investor sentiment, economic outlook, rising inflation and human psychology – it seems even the experts can’t agree.

Here is a summary of the forecasts of the ASX200 by year’s end:

Macquarie                          5800

AMP                                   5700

CommSec                           5600

Trading Economics             4610

BT                                       5750

UBS                                     5700

Credit Suisse                       6000

Citi                                      5900

MorganStanley                    4800

Royal Bank of Scotland        4000

Thanks to Adviser Ratings, we can represent the above figures in graph form:

These forecasts represent a difference in size of market cap of about 30% on the ASX200! In dollar terms – that is around $400 billion!!

So what to do?

We liked what investing legend Jack Bogle had to say on CNBC – as the Dow tumbled by 400 points.
‘Just stay the course. Don’t do something, just stand there. This is speculation that we’re seeing out there, and you can’t respond to it.’

As evidenced in the above graph, volatility in the market is not new. It has existed for centuries. And while there’s no doubt that the global economy still faces challenges, it is likely that the best time to buy, as ever, is ‘NOW’.