Volatility continues as ASX stages record-breaking rally following Thursday's global slump
As central banks move to shore up liquidity and bolster financial stability, investors are stuck on the rollercoaster ride of stock market volatility.
Thursday’s global sell-off was dramatic. In Canada, the market plunged by the largest amount in eight decades amid coronavirus panic and fears of a global recession.
But Friday brought a surprise rally for the Australian stock market. It too saw a huge sell-off in the previous session, but as Friday 13th trading progressed, it proved lucky as the S&P/ASX index flipped from an 8% loss to a 4.4% gain, the largest intraday jump since the index launched in 2000.
Beyond the volatility, some investors stand to make a fortune according to the CEO of global financial advisory deVere Group.
“Global markets were thrown into turmoil Thursday as fear gripped investors over the jump in confirmed coronavirus cases and as governments around the world introduced measures to try and halt the spread, which contributed to the panic,” said Nigel Green. “All assets - even safe-haven ones such as gold and Treasuries - were being shed in order to shore up cash reserves to meet margin requirements.”
Central banks action
But Green believes this to be a temporary situation with easing of sell-offs as central banks introduce liquidity measures.
After the closing bell Thursday, the Bank of Canada announced it would be taking steps to inject billions of dollars into the funding markets to ensure liquidity and maintain intrabank funding.
Green says that the markets are looking for reasons to return to the bullish default we have seen for a long time now. The central bank actions being taken could be the catalyst.
“We expect global stock markets to have recovered significantly before the year-end,” he said.
Building wealth
While Green acknowledges the serious and tragic consequences of the coronavirus outbreak, he also notes that canny investors will turn a crisis into opportunity.
“Fluctuations can cause panic-selling and mispricing. Sought-after stocks can then become cheaper, meaning investors can top up their portfolios and/or take advantage of lower entry points. This all typically results in better returns,” he said. “A sensible fund manager will assist investors to seek out the opportunities that turbulence creates and mitigate potential risks as and when they are presented.”
