MUM and dad investors should brace for an extended stretch of uncertainty in global markets as volatility becomes ‘the new normal’, according to Deakin finance associate professor Victor Fang.
But Prof Fang says jittery property and share owners should make sure they don’t panic.
As a former banker, Prof Fang was on the financial frontlines when world markets collapsed during the Global Financial Crisis of 2007-08.
He said Australian investors today are caught in a similar cycle of overreaction and panic.
“The perfect storm of Greece defaulting on its international obligations and a rapid meltdown of China’s share market has knocked the confidence of Australian investors in a way not seen since the Global Financial Crisis,” he said.
“People say ‘but Australia isn’t paying Greece’s bills’ and ‘I don’t invest in China’s share market’ but the interconnectedness of global financial markets means we’re still impacted by what’s happening overseas.
“The uncertainty in Greece and China means investors are pulling out of equity markets and flocking to the relative safe haven of government bonds.
“As long as uncertainty and fear rule, the rollercoaster ride will continue for Australian investors.”
Prof Fang said ongoing volatility in China would have a longer-lasting effect on Australian markets than the turmoil in Greece.
“Both are bad news for Australian investors, but China is our biggest trading partner and its growth is closely tied to our commodity prospects – so it’s the one to watch,” he said.
