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.

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Oliver’s Insights 30th Edition
by Dr Shane Oliver
Head of Investment Strategy and Chief Economist
AMP Capital Investors

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