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Tuesday, 10 March 2020

Panic selling accelerates

Stocks crash

Stocks were monstered again last night, with the Dow Jones closing down by well over 2,000 points, or about- 8 per cent. 

The S&P 500 was halted in early trade as the circuit breakers were triggered. 

It's not unusual for stocks to go into a drawdown but the sheer speed of this correction has been unusual.

Source: Michael Batnick

Valuation matters

Despite the freefall, US stocks remain historically speaking expensive.

One of our preferred measures is the CAPE ratio, at at 26,08 this remain far above the long run average of 16.7, despite having fallen from above 33.

Source: Shiller

So at this stage my allocation plan demands that I retain a high allocation to cash (or mortgage offset accounts), and only a controlled exposure to stocks. 

Note, this not advice: you need to develop your own plan that works for your situation.

Australian stock futures are down another 273 points this morning, or about 5 per cent, to 5,432.

At such times, I can't stress enough how having your own written investment plan and policies - and sticking to them - becomes an investor's best friend.