The Aussie stock market just wiped out all of 2024's gains! Time to buy?

We're back to the start for 2024 after another negative session. Is there a way for investors to make the most of it?

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It was one of those days where you'd be hard-pressed to find the glimmers of green on the Australian stock market. Only 16 companies included in the S&P/ASX 200 Index (ASX: XJO) made it out unscathed on Tuesday, while the rest experienced varying losses.

A fourth consecutive day of red has undone all of the prior progress made in the Aussie market in 2024.

The benchmark tumbled 1.8% today, taking it back to 7,613 points. As a result, the Aussie index is 0.2% below where it finished in 2023. It's a disappointing development considering investors were looking at a year-to-date gain of 4% less than three weeks ago.

Why is the Australian stock market falling?

If only the share market could speak… oh, the stories it would tell. Alas, the market is not sentient (yet!… who knows with AI), so we can only speculate on what drives the descent.

Given the news of late, you could probably take your pick. The world has been more chaotic than usual, and as always, chaos does not sit well in the belly of the stock market beast. Heightened unpredictability makes investors anxious, prompting some to sell.

As my colleague Bernd Struben detailed yesterday, fears of war in the Middle East have shot upwards. An attack by Iran on Israel escalated tensions across the region. With threats being made against United States bases, people are concerned about further conflict.

In a completely different lane of concern is the recently reported US inflation. Monthly data showed an increase in the country's consumer price index (CPI). The news jolting the stock market with the potential of higher interest rates for longer.

Meanwhile, there is no shortage of analysts preaching about an overvalued market.

Take J.P. Morgan, for instance. An analyst at the investment bank described equities as "disconnected" from rising bond yields. Global markets strategist Marko Kolvanic went on to say:

Persisting inflation forces raise the risk that rates will need to stay higher for longer than expected, which could in turn weigh on economic activity and equity valuations.

We therefore maintain an overall defensive stance in our model portfolio, with an underweight in equities and credit versus an overweight in commodities as a hedge for inflation/geopolitics and cash.

Thrown all together, it's a recipe for selling.

Is it buy time?

You probably already know what Warren Buffett says: "Be fearful when others are greedy and greedy when others are fearful." The tactic has worked for the CEO of Berkshire Hathaway, amassing a US$133 billion net worth.

The hard part is determining if now is one of those 'fearful' times.

My strategy? I keep on buying in all stock market conditions. Usually, the classification of a greedy or fearful time is only apparent through hindsight. And unfortunately, I do not own a time machine.

Buying consistently through dollar-cost averaging removes the need for a time machine. Sometimes I'll buy at the highs, and sometimes at the lows — it all averages out over time.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Berkshire Hathaway and JPMorgan Chase. The Motley Fool Australia has recommended Berkshire Hathaway. 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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