Back in May I called for the market to pull back as we headed towards the end of the financial year.
In June it appeared that the returns for the 2014-year were not extra ordinarily high. Profit taking by fund managers to lock in bonuses did not seem to play out.
Fast-forward to August and we have seen the market pull back six days in a row, which is no doubt a short-term trend.
The question is why?
The market was at 5620 when the pull back started and closed on Friday around 5420 some 200 points or 3.5% lower.
The commentary seems to focus on wars and conflict overseas but there is always a war on.
My opinion is the reporting season. Which for some companies will be a shocker.
I note media using the phrase “Market Correction”. At 3.5% it is a pull back. At 10% or above we might start talking about a correction.
So what to do now?
Rio had a good result. I expect most miners will.
But, the retail sector should have a shocker due to unemployment running wild at present.
Long-term investors with cash will have an opportunity to pick up some out of favour companies.
But I warn you the recovery for retail will take years, not months.