“We will continue to make sure our multi-asset portfolios are appropriately positioned to respond to the uncertainties that remain in global markets.” - John Owen - MLC Portfolio Specialist

What’s exactly happened?

In the past few weeks, global share markets have been particularly volatile. This has been fuelled primarily by weaker economic data from China and the surprise devaluation in its currency, the renminbi. It has also been fuelled by continuing weakness in a number of the other main emerging market countries like Russia and Brazil.

How does this impact Australia?

As you would know, Australia has also experienced its fair share of market volatility in the past few weeks. This is somewhat unsurprising given the influence the Chinese economy has on our economy. While it was negatively impacted in this case, its influence was also evident during the GFC when our resources boom, fuelled largely by Chinese demand for our resources, helped insulate our economy from more widespread downturns.

Should I be selling my investments now?

While market downturns are generally unpleasant for investors, they are to be expected as uncertainty will never disappear from any financial market. History has shown us that Australian and global share markets have eventually bounced back from numerous down times, including the GFC.

By selling your investments immediately after a correction you’re not only incurring losses, you’re reducing your chances of making your money back should markets recover.

The reality of investing in share markets is that we need to accept some risk when seeking returns that will outpace inflation in the long run.

Should I be moving my investments to cash?

Throughout history there have been numerous examples of share market downturns which have prompted investors into making hasty decisions.

If you’re thinking about moving some of your investments into lower risk investments like cash, you should be aware that should the share market recover, only the portion of your portfolio that remains invested in growth assets like shares, will benefit.

Are there still investment opportunities now?

For investors with a medium to longer term investment horizon, these volatile conditions most certainly provide attractive investment opportunities as prices can be lower than before.

I’m retired or close to retirement, what should I do?

While history has shown us the share market does bounce back, it’s not always easy to ignore what’s happening to your investments when there is so much negative news and markets are volatile. If possible, you should continue to focus on how you are progressing towards your longer-term goals. However, if the recent market volatility has unsettled you to the point where you would prefer to reduce your exposure to riskier assets or protect some or all of your capital, there are some solutions available. For example, the MLC Inflation Plus portfolios have a strong focus on risk management and are designed to limit significant negative returns. Our range of MLC Horizon portfolios are designed to meet a broad spectrum of risk appetites. And, we also offer strategies that aim to protect capital and income.

Where to from here?

We will continue to make sure our multi-asset portfolios are appropriately positioned to respond to the uncertainties that remain in global markets. However, it’s also worth remembering there are a number of positives that tend to be forgotten when markets are weak and volatile. For instance, the US economy continues to perform well. Lower oil prices have benefitted consumers across the globe and inflation isn’t a problem at this time. China’s growth has slowed but +10% annual growth rates were always going to be hard to sustain