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NEW YORK, August 6, (WNM) - The world's stock markets gave in on Monday. Crash prophets have already appeared everywhere. However, there is no reason to panic. Equities in India and Turkey performed well, the U:S. and Europe suffered, but only a little.
U.S. stocks even rose on Tuesday, helped by technology shares, and China stepped in to stabilize the yuan, a day after Wall Street's main indexes suffered their sharpest one-day percentage declines of the year.
In general, a correction of prices was overdue. Due to the policies of central banks around the world, investors have few alternatives. Stocks and real estate are the most popular assets, as they deliver return. Negative interest rates for wealthy private clients such as announced by Swiss bank UBS will be normal quite soon.
Low interest rates have created asset bubbles.
The Chinese are now trying to let the air out of the bubble in a controlled way. It is quite possible that the PBOC's action has been agreed between the central banks. It look like a controlled demolition.
As long as no one loses their nerve, a crash is unlikely.
Nevertheless, not everything is going to run smoothly.
So private investors should act now and take a close look. They are not as well hedged as institutional investors, and they don't have the dynamics of the algos to react in real-time. So private investors stay vulnerable as no one really cares about them in a very tough environment.
Hence investors should be cautions with assets that are complex. Currencies in emerging markets, especially in Asia, could come under pressure.
Above all, cheap interest rates have created many "zombie" companies. These companies simply dragged on with new, cheap debt.
So now every listed company needs to be scrutinized: How much is hot air? How competitive is the company? Are the figures really plausible?
It's a good time to evaluate and shift investments. Most investors have made good returns in recent years. What is important now is a cool head, a clear analysis and a goodbye to greed.