The ASX share market has suffered a significant sell-off over the last few days as investors fret about a potential impending recession in the US.
The S&P/ASX 200 Index (ASX: XJO) dropped 5.7% between Thursday to Monday.
According to reporting by CNBC, the global share market is suffering volatility because job growth in the US has slowed more than expected, with unemployment increasing to the highest level since October 2021.
CNBC reported that economists were reportedly expecting 185,000 jobs to be added in July in the US, but it was just 114,000. This was much slower than the 179,000 jobs added in June. The unemployment rate increased to 4.3%.
Investors are supposedly worried that the US Federal Reserve should have reduced interest rates by now, with the worsening economic picture.
Should we be worried about the stock market?
It's normal for the ASX share market to experience volatility, though the size of the decline is among the worst we've seen this decade over two days of trading.
Investors often have a hopeful view of the future, so if their outlook is too positive, negative news can lead to a pullback.
Of course, we should keep in mind that the ASX 200 is still (slightly) up in 2024 to date. The iShares S&P 500 ETF (ASX: IVV) is still up around 15% this year.
Investors often value businesses based on how much profit they think those companies are going to make in the next few years. If the profit expectation is reduced – due to higher expectations because of a possible recession – then those businesses may be worth a little less in investors' eyes.
Is it a good time to buy ASX shares?
All we can do is decide when to buy. We're usually presented with the best buying opportunities during times of investor fear and uncertainty. I'd rather buy at a cheaper price than a more expensive price. Sell-offs like this are exciting for me, even if a recession is possible (but not guaranteed).
At times like this, I like to refer to advice from one of the world's greatest-ever investors – Warren Buffett of Berkshire Hathaway. Buffett once made an excellent comparison between the share market and supermarket sales:
To refer to a personal taste of mine, I'm going to buy hamburgers the rest of my life. When hamburgers go down in price, we sing the 'Hallelujah Chorus' in the Buffett household. When hamburgers go up in price, we weep. For most people, it's the same with everything in life they will be buying — except stocks. When stocks go down and you can get more for your money, people don't like them anymore.
The lower that share prices go across the board, the better time it is to buy our favourites, in my opinion. Just look at the ASX 200 over the past five years below. The lowest/best prices are during times of the most fear.
I'm planning to use this time to search for ASX share opportunities.
