Global stock market volatility will continue even after events in Greece and China subside due to the interconnected nature of economic systems claims an Australian academic.
Deakin Finance, Associate Professor, Victor Fang stated volatility will becomes ‘the new normal’ but there has been a similar cycle of over-reaction and panic as that which surrounded the Global Financial Crisis of 2007-08.
Fang said recent events in Greece and China, while removed from the Australian market would have an ongoing effect which could not be avoided.
“The perfect storm of Greece defaulting on its international obligations and a rapid meltdown of China’s share market has knocked the confidence of Australian investors in a way not seen since the Global Financial Crisis,” Fang said.
“People say ‘but Australia isn’t paying Greece’s bills’ and ‘I don’t invest in China’s share market’ but the interconnectedness of global financial markets means we’re still impacted by what’s happening overseas.”
According to Fang the uncertainty surrounding Greece and China has resulted in investors pulling out of equity markets and shifting to government bonds.
“As long as uncertainty and fear rule, the rollercoaster ride will continue for Australian investors,” Fang said.
