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08:17
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Originally posted by david25:
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When interest rates fell the asx rose to ridiculous levels. When bank returns were 3% blue chip was paying 8 to 10%. When interest rates fell to near zero the returns on the asx fell to 2% which was an indicator the ASX was over bought. Low interest rates is causing inflation and and when the US increases interest rates we will need to follow or Australia will become a foreign investment risk. If Australia fails to increase interest rates our dollar will fall to around .63 usd which would result in 11% foreign exchange loss in trade and investment. If will also create inflation issue for Australia as we enter a recession. The asx 200 is falling in anticipation of the US raising interest rates, this will result in Australia following to prevent foreign exchange losses and also prevent further inflation. When Australia raises interest rates there will be a retrace of the ASX 200 back to around march 2020 or PE ratios of 8 to 12 based on market volatility . How to predict your share price in a crash. Historical Pe ratios are around 8 to 12 for the asx 200 . If your shares are trading at a pe ratio of 27 then the share price will drop by about half. Its not and exact science but its a guide. How can this differ from company to company. Growth opportunity, cost cutting, efficiency, cheaper finance, development time, de merger.
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I agree with your analysis. Another way to estimate the fall and if it's worth it to enter after the fall is the comparison between the inflation as mirrored at the term deposits rate vs the dividend yield of ASX 100 or ASX 200.
