Crisis to opportunity

The extraordinary events that have plagued the world money markets over the past few weeks have reinforced the eternal theory that ‘from crisis comes opportunity’.

While the market is offering substantial discounts take advantage of it.

The chance to buy cut-price bargains in the prevailing market is outstanding. Opportunities abound, not just for the short-term trader but also for the long-term investor. Let’s have a look at relevant stock market history first to get some significance and perspective.

Most of the time the market moves very little, with 96% of the trading days over the last 94 years delivering a gain between -2% and +2%. In fact a move of 7% or more to the downside occurred on less than 0.1% of the trading days. In the last 94 years there have only been 18 out of 23,586 trading days that produced a move in the market as immense as we have seen in the past few weeks.

Most investors will undoubtedly remember the days in recent history where the market has fallen to a great extent. The September 11 terrorist attacks, the Asian economy collapse and the 1987 crash, the anniversary which we now observe.

Since 1987, every time the Dow Jones Industrial average dropped by 5% or more the ultimate market low occurred on that day or within a few days of the drop. A sharp rebound followed in every instance, with a rally lasting for a few months. This is the positive point of reference.

Looking at history prior to 1987, and before most investors can remember, the markets still rebounded rapidly from the large down day, but this rally turned out to be a dead cat bounce. The markets continued to fall; however the heavy drop was within one month of the ultimate low in the market.

Based on history it is probable that we have seen the low point in the markets and a turning point is imminent. For further information please contact us at NISER on 5442 5050 or niser@niser.org.au

We obtained this research for your information from The Cube Financial Group PTY Ltd AFSL 232455 (“Cube Financial”) a subsidiary of MDS Financial Group Limited with the following disclaimer: Cube Financial has made every effort to ensure the reliability of the views and recommendations expressed in this material. The information presented by Cube Financial is based upon information known to us or information obtained from sources external to the company, which we believed to be accurate and reliable at the time of publication but we do not warrant its completeness or accuracy, or warrant any results from the use of this information
This information is prepared for the general information of traders and investors. The information does not take into consideration the specific needs, investment objectives or financial situations of any person. Any individual reading this should discuss, with their financial planner or advisor, the merits of any recommendation or offer presented in this material for their own specific circumstances and realise that not all investments are appropriate for every individual.

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