Share market slump continues

Share market woes continue, but for The Motley Fool, it's not a time to be selling.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Share market woes continue, but for The Motley Fool, it's not a time to be selling.

$30 billion wiped off sharemarket The Age

Markets tumble as investors run for coverThe Australian Financial Review

Aust shares plummet on US recession fearsninemsn

Nowhere to hide as shares diveThe Australian Financial Review

The headlines say it all. Wednesday saw Australian shares suffer their biggest one-day fall of the year, closing at their lowest level in a year. Thursday was no better, the S&P/ASX 200 index losing another 1.3% to close below the 4,300 level.

Official: it's a correction

We're officially in correction territory now, the index having plunged more than 13% since its high point in April this year.

The doomsters will simply call this the continuation of a decade-long bear market.

In the U.S. the Nasdaq peaked way back in March 2000, and today is still over 45% off that peak.

In Australia, our market peaked in October 2007 at the heady level of 6,750. It could take 5 years or more to get back to that peak. If so, we'd be staring at our own lost decade. At least, with the U.S., Japan and the UK, we'd be in good company.

Give up on shares now?

Here at the Motley Fool, we're glass half-full people. Sure, it has been a tough few years for share market investors, but is that alone a reason to give up on the market now?

We all know the time to buy shares is when they are cheap.

So why don't we do it?

It's all in your head.

People don't buy when shares are cheap because…

1) They could get even cheaper. Who's to know tomorrow won't bring another big fall? Or next week? Next month?

2) Shares only get really cheap when pessimism is at its peak.

Today, you don't have to look far to get a good dose of pessimism.

The debt-ridden U.S. economy is moribund, taking the U.S. stock market and commodities down with it. Witness the recent falls of BHP Billiton (ASX: BHP), Rio Tinto (ASX: RIO) and Santos (ASX: STO), for example.

In Europe, Italian and Spanish borrowing costs have risen to new highs, sparking contagion fears.

Locally, retail sales have plunged to a near 50-year low.

No surprises then that retailing shares Billabong (ASX: BBG), David Jones (ASX: DJS), Harvey Norman (ASX: HVN), JB Hi-Fi (ASX: JBH), Myer Holdings (ASX: MYR) and Noni B (ASX: NBL) are all trading at close to 52-week lows.

Boom or bust?

It doesn't matter the mining boom remains in full swing, for the moment anyway. Perish the thought it sees a significant and prolonged slowdown.

And what about commodity prices? All we can say is it takes a brave investor to bet against China, over the long-term.

In an excellent Fairfax article titled China: it's full speed ahead, Nobel-prize winning economist Michael Spence says China's explosion of economic growth could last for another two decades.

The thought of it all has The Motley Fool's very own Investment Analyst Dean Morel licking his lips. He's thinking mining services stocks. Watch this space.

Given all this pessimism, it's no wonder investors are sitting on the sidelines. Shares might look cheap, but that alone doesn't stop them getting cheaper.

But, we'd rather be buyers now, with the index at around 4,300, than buyers at close to 5,000. As the old Warren Buffett quote goes, you pay a high price for a cheery consensus.

Time to sell?

On the flip side, is it time to sell?

We all know the time to sell shares is when they are expensive.

Are they expensive today? On face value, no. Still, there are plenty of value traps out there, companies facing structural headwinds, particularly in the traditional media. The easy way to avoid them is not to buy. Job done.

A quick look at some of the bigger losers over the past 4 months might give you a few investing ideas.

Company Share price movement

11th April to date

Woodside Petroleum (ASX: WPL) (22.7%)
Computershare (ASX: CPU) (15.8%)
Origin Energy (ASX: ORG) (16.3%)
Westpac Banking Corp (ASX: WBC) (18.6%)
Seven West Media (ASX: SWM) (34.6%)
WorleyParsons (ASX: WOR) (19.8%)

Any analyst worth their salt will tell you just because a company's share price has fallen is no reason alone to buy. But there's been some pretty dramatic falls in recent months.

So what's an investor to do? Don't panic. Turn off Sky Business News. Maybe do some bargain hunting.

These times will pass, and the ones who keep their cool will win. That's always how it works.

More Foolishness:

Free Report: Read This Before The Market Crashes (it's never too late)

Motley Fool staff and freelancers, including Bruce Jackson, may have interests in any of the stocks mentioned in this report. These interests can change at any time. The Motley Fool has a living, breathing disclosure policy.

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »