Russell Market Review
Analysis of recent economic events and market movements
Don't fall overboard - choppy seas require a steady hand
Risk aversion ran high and market sentiment ran low during the first quarter of 2008, as the Australian equity market recorded its worst quarterly performance since the 1987 crash, declining 14.6%. International equity markets fared slightly better, but still dropped 12.5% (in AUD terms), while Emerging Markets retraced 14.4%. International Property Securities recovered somewhat from a poor end to 2007, rising 0.2%, while the hapless Australian Listed Property Trust sector continued its woes with a 19.1% fall, following on from the 13.0% decline in Q4 2007. Fixed Income markets played their defensive roles well over the quarter, with Australian Bonds rising 2.2% and International Bonds gaining 2.7%.
The past five months have been an emotional roller coaster ride for investors. Following such large falls, the temptation to shift away from growth assets can be particularly strong. Before doing so, however, investors should be reminded that large equity market corrections are a natural part of being a long term investor. Further, the fact that equity markets can deliver such poor shorter term results is one of the key reasons equity markets outperform cash and bonds over the longer term – to compensate for shorter term volatility. History tells us that although the outlook can appear bleak after significant market falls, these periods have generally been the worst times to capitulate and sell out of growth assets. As ever, remaining disciplined and diversified will be the keys to emerging strongly from the current bear market.
In this edition of Russell Market Review, Jon Eggins discusses the performance of investment markets over the first quarter of 2008, along with the major economic trends affecting them.
Quick Overview
- Fed reacts to subprime fears, US dollar continues to fall
- Australian Equities
- International Equities
- Emerging markets
- Australian Listed Property Trusts (LPTs)
- International Property Securities
- Australian Bonds
- International Bonds
- Financial torpedos
- Risk is back
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