Just how low can the market go

ANALYSTS are still questioning how far global share markets may drop, or indeed if they will continue to fall, after two days of heavy losses on Wall Street sparked plunges across global markets.

Patersons economic strategist Tony Farnham said investors in the US were grappling with several issues, including the rising returns from relatively risk-free Treasury bonds, compared to riskier assets such as stocks.

Wall Street also has been affected by stockspecific stories, such as US bank Wells Fargo tumbling 10 per cent.

Some recent profit results from the likes of tech giants Google and Apple have also failed to inspire investors.

Furthermore, there is continued debate over whether the US Federal Reserve is going to increase rates more than three times this year.

“It’s not the [US] economy pushing the stock market down — it’s the expectations of what [the US Federal Reserve] does, which is a key factor at play,” Mr Farnham said.

He suggests investors holding quality stocks try to ride out the volatility.

“I honestly don’t know where it will go in terms of a fall,” Mr Farnham said.

However, he said Australian blue chip majors “will be there at the end of all this, barring some absolutely catastrophic stockspecific story”.