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What today’s ASX 200 selloff tells me

The S&P/ASX 200 Index (ASX: XJO) has suffered a bit of a selloff today. It’s down by almost 3% at the time of writing.

That’s a pretty rough day. This much of a decline has been rare since the original coronavirus crash during March 2020.

I think today’s ASX 200 selloff tells me a number of things:

Investors are still jittery

The way the market has been recovering since March 2020 made it seem as though everyone was confident the economy will rebound fairly quickly.

But today’s selloff shows that some investors are nervous. The share market doesn’t fall 3% when everyone is feeling bullish at the current share prices.

Looking at some of the biggest declines, the National Australia Bank Ltd (ASX: NAB) share price is down 5.6%, the Australia and New Zealand Banking Group (ASX: ANZ) share price is down 6.2% and the Westpac Banking Corp (ASX: WBC) share price is down 6.6%. It seems the share market is not through the volatility yet.

Comments by officials can still have a big effect on the ASX 200

Today’s selloff was supposedly caused by the Federal Reserve’s Jerome Powell. He essentially said that the US economy probably isn’t going to rebound in a quick V-shape.

According to the Australian Financial Review, Mr Powell said: “This is going to take a whole lot of time. There are just a lot of people that are unemployed and it seems quite likely there will be a significant group, even after a lot of strong jobs growth, that will still be struggling to find jobs.”

In my mind, I thought that it was already established that (US) employment wasn’t going to bounce back to pre-COVID-19 levels rapidly. But apparently that’s new information to some investors.

The ASX 200 is influenced by the outlook for the underlying earnings of the shares. The US economy’s performance is important for Australia. The US share market is very important for investor confidence in the ASX 200.

It may still be possible to pick up some investment bargains

Who knows how long or deep this selloff will be? The dip could just be today and bounce back tomorrow. Or it could be the start of another decline.

Investors who have been disappointed about missing the bottom of the ASX 200 selloff may be getting another opportunity to buy cheaper shares. I’m certainly interested in buying if things go lower.

I don’t think today’s decline is worth jumping on, but if the selloff continues into next week then I’ll start putting some money to work again.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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