US Federal Reserve Chairman Mr Ben Bernanke’s comments overnight have sent share markets into a nose dive. US indexes lost over 1%, while on the Australian bourse the opening half hour saw the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) lose 1.4%.
The phenomenal money printing that has buoyed the US market since the GFC certainly puts the world economy in uncharted waters and it is this unknown that is creating nervousness for financial market participants. Financial stocks, given their leverage to the market, were particularly hit in early trade, with Macquarie (ASX: MQG) and Westpac (ASX: WBC) both falling over 2%, while defensive stocks such as Wesfarmers (ASX: WES) and Woolworths (ASX: WOW) held up well and were down 0.9% and 0.5% respectively.
Volatility can be an investor’s friend if one can remain calm and take a long term view. Owning safe, high quality businesses is one way for investors to sleep well at night. Volatility can create the opportunity for investors to add high quality businesses to their portfolio at lower prices, so investors need to be ready to seize such opportunities.
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Motley Fool contributor Tim McArthur owns shares in Macquarie Group.
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