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The ASX is expected to melt on Monday and here’s what you need to know

Buckle in Fools! We are about to embark on the wildest ride in at least a year with the S&P/ASX 200 tipped to suffer a painful broad-based selloff this morning.

We can thank our US friends for the bloodbath as the Dow Jones Industrials Index crashed 666 points on Friday – its worst one-day fall since mid-2016.

Other key US equity benchmarks experienced significant pain as well with every one of the 11 S&P sectors losing ground as investors beat a hasty retreat.

Expect a similar sell-down for our market as I am not expecting anything to be spared – although this should actually excite equity investors!

This is because history has shown that periods of indiscriminate selling are more often than not a highly profitably buying opportunity – unless of course the sell-off is sparked by a real economic or financial catastrophe, such as during the GFC.

But we are not anywhere close to those distressing times. If anything, economic growth is accelerating and the shock sell-off on Friday was triggered by better-than-expected jobs figures in the US, which sent the 10-year Treasury note spiking higher on bets that interest rates in that country will rise faster than the market was expecting.

In other words, this sell-down is actually triggered by good news and not bad. This is another big reason to buy the dip!

You’ll probably be spoilt for choice on where to start too as I don’t think even defensive stocks will be spared from today’s expected carnage. If anything, defensive stocks like infrastructure and utilities could actually fare worse than the broader market as they tend to be negatively correlated to rising bond yields.

This won’t be good news for the likes of Transurban Group (ASX: TCL) and APA Group (ASX:APA), although financials are likely to also come under considerable pressure as they typically do when there is discord in financial markets.

This is why I am also expecting the banks like Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC) to fall with the market, along with insurance company QBE Insurance Group Ltd (ASX: QBE) and investment bank Macquarie Group Ltd (ASX: MQG).

If you thought resources stocks such as BHP Billiton Limited (ASX: BHP) and Santos Ltd (ASX: STO) will fare better given that the sector is cum earnings upgrade, think again. Just about every commodity fell along with equities and bonds.

This includes gold, which is meant to be a safe haven during times of volatility. Guess someone forgot to tell the gold traders.

It is anyone’s guess how long the sell-off will last but don’t let this fall go to waste.

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Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited, Macquarie Group Limited, and Westpac Banking. The Motley Fool Australia has recommended Transurban Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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