Why The ASX 200 (XJO) And All Ordinaries (XAO) Are Going To Fall Heavily Today

Australia’s share market, represented by the ASX 200 (INDEXASX: XJO)(^AXJO) and the All Ordinaries Index (INDEXASX: XAO)(ASX:XAO), could take quite a tumble today.

The ASX futures is already showing an opening decline of 130 points for the ASX, which suggests a drop of around 2%.

A 2% fall doesn’t sound like much when some shares can decline by more than 10% in a single day, but for an entire index it’s a big move. Approximately 2% is a rough day in share market terms.

Why Is The ASX Going To Fall?

The ASX takes a lot of its short term direction from international markets. Australia’s success is heavily linked to world trade, so if trade falters then Australia could be one of the ones to suffer.

We saw the S&P 500 (INX) fall by 2.9% and the Dow Jones dropped 3%. Ouch!

The German economy, as measured by its GDP, contracted in the second quarter of 2019 whilst the growth of the Chinese industrial sector reached a 17-year low. Two of the biggest economies in the world slowing down could have knock-on effects to other places like the US and Australia.

Just think how much companies like BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO), South32 Ltd (ASX: S32), Amcor Limited (ASX: AMC) and Macquarie Group Ltd (ASX: MQG) rely on a solid global economy.

Another warning for investors was that the 2-year and 10-year US treasury bond yields inverted for the first time since June 2007, which is seen as a predictor of an impending recession.

US President Donald Trump again pointed the finger at the US Federal Reserve and Chairman Jerome Powell as a reason for the decline.

Of course, it’s President Trump’s decisions and words/tweets that are having a big effect on the share market and economy as a whole. There are consequences to actions taken.

Is It A Good Day To Buy?

It’s going to be an interesting day, but if you’re buying shares then days like today could be an opportunity with cheaper prices. I’ve got my eyes on the reliable shares in the free report below which could quite easily ride through a potentially recession.

At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.

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