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Do economic conditions make ASX shares a buy or a sell?

Should ASX shares be considered a buy or a sell in the current economic conditions?

The ASX 200 (ASX: XJO) is currently down around 2%, but over the past year it’s up 16.5%. Are ASX shares a buy or a sell with what’s going on?

Australia’s share market has received a number of boosts this year, particularly from the Reserve Bank of Australia (RBA) cutting interest rates and the Liberals winning the federal election.

However, investors continue to be fearful of decisions by US President Trump and what it could mean for the global share market. He just announced that he’s going to put tariffs on Brazil and Argentina for supposedly manipulating and devaluing their currencies.

Australia’s economy is quite dependent on exports and global trade, so a global slowdown could hurt Australia’s economy.

There have been many false warnings over the past decade. If we sold shares every time there was something to worry about we’d only stay invested for a couple months a year and make our broker very rich. I think it’s best to stay invested for the long-term. Time in the market is better than timing the market, and so on. 

Sure, there are certain economy-facing ASX shares I don’t want to hold in my own portfolio like banks such as Australia and New Zealand Banking Group (ASX: ANZ). Resource shares such as BHP Group Ltd (ASX: BHP) could also come under pressure. Certain retail shares could also face leaner times like Breville Group Ltd (ASX: BRG).

But, just today we learned that Australia has recorded the first consecutive trade current account surplus in 46 years. This time the surplus was $7.9 billion thanks to iron ore.

The bigger end of the ASX 200 may be a bit expensive, but I think there are lots of reasons justifying these heights including the lower interest rates, a strong federal budget position and an improving housing market.

However, I think there are more attractive ideas lower on the market capitalisation list like Brickworks Limited (ASX: BKW), Webjet Limited (ASX: WEB) and City Chic Collective Ltd (ASX: CCX) that have good growth prospects, are trading at good value and have quality management.

Foolish takeaway

I don’t think you should base your entire investment strategy about what’s happening in the economy. But, you can let the market shower you with potential investments because some people are fearful about what’s going on. There’s always something that could be worth buying. 

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Brickworks and Webjet Ltd. 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 Scott Phillips.

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