Well Fools, it seems we may have survived yet another market scare.
After an agonising September and a close encounter with a "technical correction" – defined as a 10% fall in prices – things are certainly starting to look up again for investors.
The S&P/ASX 200 (INDEXASX: XJO) managed to record its biggest weekly gain in two months last week, up 1.6%, while the broader ALL ORDINARIES (INDEXASX: XAO) jumped 1.4%.
And to top that off, the ASX 200 is up a further 50 points today, taking it to the 5,322 level. By my calculations, that's just 6.3% below its August peak at 5,680 – and it seems we're closing in.
Of course, we're still facing some key risks. Volatility remains high in equity markets around the world, with some of the major concerns being global growth prospects, a breakout of the deadly Ebola virus as well as military conflicts around the world.
There are also concerns regarding the lofty valuations of some of Australia's most popular stocks, as well as the outlook for commodities such as iron ore. Companies like BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) have led the market's recovery following a jump in the iron ore price, but it's questionable how sustainable these higher prices are.
Similarly, Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC) and Telstra Corporation Ltd (ASX: TLS) have also recovered from their recent lows, but further selling from foreign investors could see them return to the red.
But all in all, things are again looking good for the market.
While that's great for investors who took advantage of discounted prices and bought high quality companies while the market was sinking, it's not so good for the investors who sold their investments in a state of panic.
It can be one of the most difficult elements to investing – knowing when to sit on your hands and do nothing when every human instinct might be screaming to escape and stop the pain.
But the reality is, the stock market is always going to carry greater risks than other asset classes. That's why we expect superior returns from shares than from 'risk-free' investments such as bonds or term deposits.
While there is no way of knowing where the market will be tomorrow, next week or even in 12 months' time, we can be almost certain that there is only one direction for the stock market in the ultra-long run. Up.
That's why now is still an excellent time to buy up high-quality Aussie stocks. While they might not be as cheap now as they were this time last week, the difference of a couple of percentage points isn't going to make a big difference to your long-term returns.
