FOMO trumps global fear as investors pursue returns in 2020

Media release
16 January 2020

Investors must desensitise to global volatility, avoid panic selling and make the most of record-low interest rates to secure meaningful sharemarket returns in 2020, according to Deakin Associate Professor of Finance Victor Fang.

With the benchmark ASX 200 at record highs and crashing through the 7000-mark on Thursday, Associate Professor Fang urged everyday investors to "hang in there" and resist panic selling based on short-term fear and overreaction to global events.

"The Australian sharemarket has started the year strongly and is up around 5 per cent in January, despite a backdrop of domestic risk and international tension," he said.

"Perversely, the Australian market has interpreted the cost of the devastating bushfires, estimated in the tens of billions, as increasing the likelihood that the Reserve Bank will cut the interest rate to 0.50 per cent early this year.

"The mere prospect of already low-interest rates dropping even further is enticing people to borrow money and invest in equities. For now, access to cheap money is offsetting concerns about global volatility.

"As the Australian economy continues to grow at a comparatively solid rate, equity investors and homeowners are leveraging the cheap cost of borrowing to pursue capital growth.

"As we begin the New Year, a 'fear of missing out' on investment returns is trumping the fear of global volatility."

Keeping one eye on real-world markets, Associate Professor Fang also watches over the Deakin Business School's Telstra Trading Room - a cutting-edge training ground for the next generation of finance experts.

Based at Deakin's Burwood Campus in Victoria, the trading room simulates a real inter-bank foreign currency trading floor, complete with pods for 15 banks, named after real Australian and international institutions, and state-of-the-art equipment including tickers, ASX and Bloomberg feeds on the trading wall.

"The Trading Room enables us to teach our students to trade in a space that looks and operates in the same way as the trading floors of major banks and corporations around the world. The only difference is that our students are trading in virtual money," said Associate Professor Fang.

"Not only do we teach the theory of trading, but we also challenge our students to take that knowledge and apply it to real-world economic scenarios. Our students are exposed to the risks, pressures and strategies experienced in real-world currency trading."

For more information on studying finance at Deakin, visit http://www.deakin.edu.au/study-at-deakin/find-a-course/finance

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