The Australian sharemarket lost almost 3% today, taking us below the depths we hit in November 2008, when the global banking system appeared to be on the edge of destruction. That’s bad for a number of reasons. Firstly, it shows that investors believe things have actually got worse since then, not better. While the actions of governments around the world have managed to stabalise the banking system, the big banks across the United States and Europe are still shaky. This problem must be sorted out before investor confidence returns.
Secondly, the sharemarket falls indicate how investors are feeling about the economy – not very positive at all. While some economists are predicting the economy will start to recover towards the end of the 2009, the sharemarket appears to be telling us the recovery is lot further away than that.
Finally, the fact we are now below last year’s low raises an ugly question: where is the bottom? No-one can say for sure, which means further falls appear certain.