This note looks at the continuing turmoil in financial markets. The key points are as follows:
• Shares have made new lows in the past week on more bank failures and uncertainty about the US relief package.
• Successful approval the implementation of the US debt relief package should head off a worst case economic slump, but won’t stop recession in the short term.
• So the ride for shares is likely to remain rough in the short term. But they are good value on a one year view.
• The ongoing turmoil and recessionary conditions in the developed world highlight the need for much lower interest rates globally, including in Australia and Asia
• For investors the key is not to panic. Selling now after 30% or so falls in share markets will only turn a paper loss into a real loss.