Despite ‘Black Friday’ wreaking havoc on the Australian stock exchange and raising fears of a worldwide recession, Wealth Within chief analyst Dale Gillham says history dictates it is no time to panic.
“Keating gave us the recession we had to have and it appears the US have to have theirs, it looks to be happening now. But the All Ords has never moved in sync with the Dow over the long term which is why there is no need to panic. Don’t expect our market to do what the Dow is doing. I expect it to bounce and even if it is not long term, I expect it to move up quite nicely,” he said.
Gillham cited several examples to back up his case.
-After the 1929 crash the All Ords continued to fall eventually bottoming in 1931 after which it rose strongly for several years. The Dow however only rose for five months and 50 per cent into 1930 and then fell away heavily over the next two years eventually bottoming in 1932 some 90 per cent down from its all time high in 1929.
-In 1987 the Dow fell slightly over 38.2 per cent of its all time high, before rising strongly to make a new all time high in 1990, by 1992 it had risen 110 per cent. In 1987 the All Ordinaries Index fell to 50 per cent of its all time high, before rising just over 50 per cent of what it had fallen by 1989, it then fell away again over two years into 1991 back to the lows of 1987.
-Neither the All Ords nor the Dow has ever fallen by more than 50 per cent of its all time high, before rising strongly.
-The Dow is at its lowest levels in 10 years, on the other hand the All Ords is only at its lowest levels for the last three years.
-From 1 Jan 2000 to yesterday the All Ords is up 31.2 per cent whereas the Dow is down 5.6 per cent.
-65 per cent of Australia’s exports go to Asia and only five per cent to the US.
Let’s see if history repeats itself.