Global shares splutter
International shares have spluttered recently thanks to worries about the looming threat of US inflation, more Russian sanctions, the defaulting Argentinian economy and the collapse of Portugal’s Banco Espírito Santo.
These worries combined in July to drag down global shares by 1%, while in the first week of August, US shares fell 2.7%, Eurozone shares fell 3.5% and Australian shares fell 0.5%.
The good news according to Shane Oliver, Head of Investment Strategy and Chief Economist at AMP Capital, is that the drop might just be a healthy correction rather than something more sinister.
“Having not had a decent pullback since January/February US shares (and hence global shares) had become vulnerable to a pullback,” said Oliver. We are also in the weakest quarter of the year for shares seasonally, i.e. its correction season. However, while it could have a bit further to go it’s likely to prove to be nothing more than a correction – say 5% top to bottom.”
Oliver justifies his position on the basis that: “Banco Espirito Santo’s situation is not indicative of other Eurozone banks; Argentina’s problems are well known and its “default” reflects a problem with a hedge fund rather than broader emerging market debt problems; tougher sanctions for Russia will harm it a lot more than the global economy and overall US earnings reports have been very strong.”
According to leading financial commentator Paul Clitheroe, despite the short term fluctuations, investing in overseas share markets delivers access to significant industry sectors like pharmaceutical, aerospace and information technology that are either unavailable or underrepresented on our local share market.
“The Australian share market is small by global standards, and if you only invest in companies listed on the ASX, you restrict your opportunity to participate in high growth regions such as South East Asia and China,” said Clitheroe.
It’s possible to invest directly in global shares through an online broker such as InvestSmart, or indirectly through managed funds.
Frequently Asked Questions about this Article…
Global shares have recently spluttered due to concerns about US inflation, increased Russian sanctions, Argentina's economic default, and the collapse of Portugal's Banco Espírito Santo. These factors combined to cause a decline in global shares.
According to Shane Oliver from AMP Capital, the recent drop in global shares might just be a healthy correction rather than a major concern. He suggests that this is a typical seasonal correction and not indicative of a larger issue.
In July, global shares fell by 1%. In the first week of August, US shares dropped by 2.7%, Eurozone shares by 3.5%, and Australian shares by 0.5%.
Investing in international shares provides access to significant industry sectors like pharmaceuticals, aerospace, and information technology, which are either unavailable or underrepresented in the Australian market. This diversification can offer exposure to high-growth regions such as South East Asia and China.
Everyday investors can access global shares directly through an online broker like InvestSmart or indirectly through managed funds. This allows for participation in international markets and diversification of investment portfolios.
While tougher sanctions on Russia are expected to harm the Russian economy significantly, they are not anticipated to have a major impact on the global economy as a whole.
The current period is considered a correction season for shares because it is historically the weakest quarter of the year for stock markets. This seasonal trend often leads to temporary pullbacks or corrections.
The collapse of Banco Espírito Santo is not seen as indicative of broader issues within Eurozone banks. It is considered an isolated incident rather than a sign of systemic problems in the banking sector.
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