The Reserve Bank has urged investors not to be overly pessimistic about global market volatility and the uncertain economic outlook. Since the start of 2016, equity, commodity and credit markets have been fluctuating and brent crude oil prices have fallen to their lowest level in more than a decade.
RBA assistant governor Malcolm Edey has told share market investors there are a number of hypotheses about the current global climate, like lower commodity and equity prices signalling a weaker outlook or overvalued equity markets naturally correcting. Another idea, he says, is that equity price falls could be an irrational response to lower commodity prices or other economic data.
But, Dr Edey says, there’s relatively little new data supporting the downbeat outlook for economies around the world, or the belief that falling oil prices reflect declining demand. “The main point that I’ve been trying to get across today is: don’t automatically swing to the most pessimistic interpretation because that’s what we see in a lot of media commentary, a kind of knee-jerk tendency to be as pessimistic as possible,” he told the Australian Shareholders Association Investor Forum in Sydney on Thursday.