It's no secret that the past month or so has been a rough period for the global share market. This has probably come as quite a shock for investors, given that 2023 and 2024 were relatively positive years for the Australian and American stock markets.
But markets don't always just go up and to the right, as recent weeks have painfully reminded us.
So today, let's assess the damage of the past few weeks and discuss what possible paths one can take as a long-term investor.
As it stands today, the S&P/ASX 200 Index (ASX: XJO) is sitting at roughly 7,855 points (at the time of writing). That's down 0.07% for the day thus far.
The ASX 200 last peaked at 8,615.2 points back on 14 February, which was (and is) a new record high for the index.
This means that since Valentine's Day's peak, the ASX 200 has suffered a notable 8.8% drop.
Last week saw the ASX 200 get as low as 7,733.5 points, its lowest point since August last year. At that point, the ASX 200 had declined more than 10.2% from its Valentine's Day heights, meaning that the index entered a technical correction (down more than 10% from its most recent peak).
It's been a remarkably similar experience for the American share markets. Since 19 February, the S&P 500 Index (SP: .INX) is currently down around 8.6% after tanking 10.13% between 19 February and 13 March.
So, how am I, as a long-term investor, approaching these market corrections?
Am I buying shares after an ASX market correction?
Well, not as much as one might think. I love a good share market correction or crash, as it can mean that the shares of quality ASX or US companies can go on sale for a bargain price.
Unfortunately, the shares that have contributed most of the pain to the recent correction have been the ASX banks. All four of the major bank stocks have taken a huge haircut over the past month.
As these stocks were clearly overvalued in mid-February, this isn't much of a surprise.
However, most of the ASX's higher-quality names haven't really seen too much of a dip, at least into value territory.
High-growth names like REA Group Ltd (ASX: REA) and TechnologyOne Ltd (ASX: TNE) have certainly let off steam. But both of these names are still trading on earnings multiples of 48.45 and 77.66, respectively. I'd need to see these names drop by far more before I would consider them compelling value opportunities.
To illustrate, REA has indeed taken a 17.5% hit over the past month. But this merely brings it back to where it was being priced back in October. And the shares, at a record high back then, weren't exactly a screaming bargain at the time.
So yes, I've been topping up on some quality shares over the past month. But I don't think we're close to a market-wide bargain sale just yet.
If the current relief rally burns out and the markets start falling again, we could well see some even better opportunities present themselves. I've still got some cash on the sidelines in case that happens. If it doesn't, I'm still mostly invested in quality shares, so it won't matter too much anyway.
Let's see what happens next.
