Westpac Exec:Why a Market Correction is in the Making

We're setting up assuming Sydney will become a renminbi trading hub,said Rob Whitfield,Group Executive of Westpac Institutional Bank.The November G20 meeting is absolutely an incentive to a free trade agreement with China.A China slowdown would slow down the economy.It would certainly affect our performance.*
I do see that we will really see a significant,meaningful asset price correction.Credit spreads are narrow,forcing a move by many into higher risk assets.Junk bond yields are at all time lows.Asset bubbles are emerging as share markets have posted successive record highs in recent times despite tapering and mixed economic results.It is my view that the current environment is ripe for a market correction that both looks and feels like what we experienced in 1994.At that time,US Treasury bond prices plummeted,causing the Fed to raise rates,which resulted in higher borrowing costs and a market correction.
Such an event need not freeze the credit markets this time the way the global financial crisis did,however.The financial system has been reformed since then.
The failures that perpetuated the recent crisis today no longer exist,Mr.Whitfield pointed out,and our ability to withstand shocks is much stronger.*
There's massive risk on the Scottish independence vote.A lot of the uncertainty has been priced in.Certainly there are lots of signs we've started to see a sea change with the US dollar,a big divergence between the US and the rest of the world.A lot of ugly ducklings are out there.It filters through the Federal open market committee on Wednesday-more event risk.There could be a lot of dollar-buying across the board,and Treasury-selling.If Fed chair Janet Yellen surprises it,the market will feel very disappointed.*
Westpac(WBK)

Portfolio Management:Leaning To Learning

Though we don't know what will happen tomorrow,we do know what happened today.We are not in a bear market,which is defined as a 20% drop or more;we are in a market correction.We are not in another recession,either;the economy is still growing,although slowly.Corporate earnings have been very good for Q2,with most firms exceeding estimates.These are the fundamental facts.Forget the knee-jerk hysteria of the sell programs that went off today.A good employment report or a supportive gesture from a central bank could set us back on the right track to a healthy market as soon as tomorrow morning.
Until that happens,we need not be sick ourselves because panic was in the financial streets on a given day.We are still the thoughtful people we were when we woke up on the morning of a sell-off.We know that,historically,those who run with the herd at such a time have always lost out in the end.
That doesn't mean it's time to buy.We could be headed for another bear market and recession.In that case,some buying on the way back up would be in order.It just isn't at that point yet.There's a lot to be said for just parking new money in cash for now until the situation is clarified over the next few days and weeks.It may not be exciting,but it is a durable plan.