Jason Beddow, from the fund management company Argo. Picture: Hollie Adams/The Australian
Jason Beddow, from the fund management company Argo. Picture: Hollie Adams/The Australian

What the Aussie market fall means for investors

"The market's back to where it was three weeks ago."

That's how Argo managing director Jason Beddow, who oversees $6 billion of investments, sums up the impact of the two-day, near $100 billion plunge in the worth of Australian stocks.

Argo is one of the favourite investment vehicles of Barefoot Investor Scott Pape. It's been around since 1946. Mr Beddow is its third boss in that time.

He isn't panicking. Therefore, arguably, neither should you.

"The market has delivered the strongest six-month return since 1990," Mr Beddow told News Corp Australia. "I'm not sure the economic and geopolitical outlook is so good as to support the best returns for 30 years. That's a little bit too punchy."

Key Australian sharemarket indices fell two per cent on Monday and another three per cent this morning.

 

"It's like a rubber band that's stretched too far," Mr Beddow said. "It generally comes back a bit."

The trigger for the reversal in sentiment has been China's retaliation to Donald Trump's latest round of US tariff increases.

Earlier this week Beijing allowed its currency to drop by the biggest amount since 2015.

That counteracts the tariff hikes by making its exports cheaper.

In response President Trump accused China of "currency manipulation", heightening investors' concerns that the tensions will heighten even further.

The implications for Australia are considerable given China is, by far, our largest two-way trading partner - 150 per cent greater than the next biggest relationship, with Japan.

Westpac chief economist Bill Evans said he did not expect the US-China trade war to cause a recession here. Australia's economy has been expanding for 28 years - a global record.

"The Australian dollar will perform its normal role as a shock absorber. We are seeing that already," Mr Evans, one of the nation's most respected economists, told News.

The dollar has fallen about 1.5 US cents since the start of the month.

That makes our exports better value, which boosts economic growth.

The decline in our currency has not been the result of any manipulation.

Unlike China's currency, the Aussie dollar goes where markets take it.

"China will be stimulate their domestic economy, too" Mr Evans said. "That will support demand for our commodities. It's a policy response that will certainly help Australia."

Mr Evans anticipated the Reserve Bank of Australia would cut the cash rate again in October and early next year to further bolster the Australian economy.

It was important that a recession was avoided, Mr Evans said.

"That would really be a major shock to business and consumer confidence.

"Economies run off confidence."

He recalled the situation in 2009, during the Global Financial Crisis, when Australia looked set to enter a recession by recording a second consecutive quarter of economic contraction.

But it was ultimately avoided.

"Our consumer sentiment index jumped 10 per cent," Mr Evans said.



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