October 16, 2014

IMF Forecast Affect Markets - Some Lessons


PSEi

Recent statement from International Monetary Fund (IMF) triggered significant slowdown on markets. IMF downgraded its 2014 world GDP growth forecast to 3.3% from 3.4%; while, 2015 forecast was downgraded to 3.8% from 4%. 

The recent scenario shows how sensitive is the business market to macro economic changes. One investor would withdraw his investment on stocks and put it on safe haven such as bonds, banks, and the likes. And why would the investor do that? Simply because he knows that the value stocks will fall; because everyone would withdraw once the bad news come out. The challenge is to be the first to withdraw, because if left behind, the day you open your eyes, you will see your stocks down (as a result the value of your investment will also decline).

This has been the action of the market every time there are significant macroeconomic news coming out. This also shows, how fast the information can travel from one place to another with the help of technology.

Stock market is very volatile; correlated to local and international economic outlook. This means that you can't afford to miss any important information.

PSEi posted a significant drop by 2.78% last October 13. Now the stock market is back to average level at 7,000 points.

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