Liquidity: The share market safety net

Don’t be concerned about liquidity risk in an equity downturn. With underlying fundamentals strong, value investors will be aggressive buyers.

Summary: Amid a pull-back in equities and volatility reaching its highest levels in two and a half years, investors may be concerned about whether they can exit the market if a sell-off occurs. After all, when there was a sudden drop in liquidity during the GFC, shareholders were left stranded. But this time is different. Even if a bond crash were to occur from a hike in US interest rates, the equity market would be insulated.

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