Media Watch: Market Update

A balanced view on today's global markets and your investments.

With recent reports on falling markets, it's understandable you'd be concerned about your investments.

Some people are asking whether this volatility is a precursor to another global financial crisis; while others wonder how long we can expect market uncertainty to last.

Getting a balanced view

Globally, the appetite investors have for risk has significantly fallen since late April, which has seen global sharemarkets fall by around 18% (at 9 August AM).

For the most part, this has been a reaction to the building concern for the slow but sure spread of the European debt crisis and the recent US debt situation.

In both cases, the delay in action by policy makers has taken its toll. You'll have seen in the news the political football that saw President Obama's debt deal agreed on the last possible day.

In isolation, these media reports are disconcerting but there are a number of reasons we have confidence in sharemarkets.

While government debt is large, there are companies around the world faring much better. In the US alone, there's $1.5 trillion in cash sitting on company balance sheets.

These companies are less concerned about cutting costs and more focused on increasing their capital expenditure.

And, thanks to the learnings from the GFC in 2008, banks are generally stronger, more transparent and the market has more certainty about where the banks are invested.

Because of this, we believe there are some great opportunities for those with a medium to long-term time horizon.

What this means for your investments

The Australian Federal Government continues to maintain its AAA credit rating and, although the economy has softened in 2011, we do have the benefit of strong export partners such as China and India.

However, we aren't insulated from the global uncertainty and that's reflected in large falls in the Australian sharemarket.

How your money is being managed is even more important during times of global risk.

The MLC Investment Management team expect markets to remain jumpy for a while but they, and their fund managers, had increased their focus on investing in quality companies with low levels of gearing and strong cash flows. These companies would fare well even in this environment.

In summary, we are confident in the sharemarket; while we may be experiencing short-term volatility we believe in the medium to long- term potential in equities.

More Information

For the latest views from MLC's investment specialists, make sure you watch the Market Update video.

Part one looks at what's causing the volatility in global markets and
Part two looks at how MLC funds are positioned to withstand the conditions.

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And if you have any concerns about how the current situation might impact you, speak to your financial adviser at Planning for Life.

General Advice Warning: This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.