Now is the time to buy

There’s been so much panic talk in the media since the election of Donald Trump to the US presidency that many investors are suddenly worried about their investments and what might be the best course of action from here.

The most important thing to remember is to not panic. If you have invested in solid companies that are well managed and profitable, they will withstand whatever the world economy will through at them this year or any year.

Secondly let’s keep things in perspective. The ASX 200 index, a key measure of the resilience of the Australia share market, started the year at 8159, traded steadily upwards to a high of 8,555 before sliding to 7,973.

So, the index has lost about 2 per cent of its value since the start of the year but it is still some 220 points or about 3 per cent higher than it was twelve months earlier. So, to date we are not talking about a significant correction.

Having said that, some shares that were looking expensive, have been ragged off their highs by the recent negative sentiment in the market and are now looking like good buying. A good example of this is the Commonwealth Bank of Australia.

In early February, the Commonwealth Bank traded as high as $167.92 a share as market pundits everywhere started saying it was well overpriced. It’s now trading at just $149.49 – some $27 dollars off its yearlong high and with that, it is starting to look like good buying.

The ANZ Bank has traded as high as $32.80 and is now trading almost ten per cent below that at about $29.46 and perhaps more importantly it is still generating a fully franked yield of 5.63 per cent. Add about a third to that if you are entitled to the full franking credits.

Many analysts are saying that now is the time to take another look at Australia’s top miners. While it is true that there is a lot of uncertainty surrounding world markets, I think it is equally true to say that a build-up of geo-political tensions is likely to lead to more defence spending not less.

More defence spending means more demand of steel among other products, not less. Yet one of Australia’s largest iron miners, BHP is down 11 % over the past year, and Fortesque Metal is down by more than a third.

Given the prevailing uncertainty and the increase in hostilities around the world it seems unlikely that the price of iron ore will remain at its current levels as nations everywhere seem to be gearing up to spend more on defence budgets not less.

So just like every downturn in the share market since the second world war, regardless of the causes behind them, when you have the benefit of hindsight, they are merely opportunities to buy great companies cheaply.

This downturn in the share market is no different. So rather than be thinking should you sell, I believe every share market investor should be looking for opportunities to buy!