Rather than panicking and selling their shares, investors should be watching the markets for signs of the expected recovery, according to wealth management firm Lachlan Partners.
Historical evidence from recent recessions shows that the Australian sharemarket tends to bottom out 12 to 18 months before corporate earnings begin rising again, suggesting that excellent buying opportunities could be just around the corner, according to Lachlan.
"Markets tend to rise through the latter parts of a recession," Lachlan Parners chief investment officer Paul Saliba said. "We need to identify when they start on an upswing – a difficult proposition as there is no historical parallel for the current situation," he said.
Saliba added that there was a "crisis of confidence" among investors at the moment, which he put down to market volatility and the planned introduction of the carbon tax.
Lachlan Partners co-founder and managing director Philip Pezzi said the lack of confidence was leading to many Lachlan clients "freezing their investment activities".
"We suggest that investors seek a health check on their financial position with a wealth management adviser to put their minds at ease, or develop a plan to deal with current market downturn and the expected recovery," Pezzi said.
"There will be excellent buying opportunities in property and shares in the near future and investors should be seeking to take advantage of them," he said.
