Sharemarket investors have been told not to hold their breath for a quick recovery, with the Australian index diving 8.
3 per cent since soaring to seven-year highs five weeks ago.
Since getting within spitting distance of 6000 points for the first time since 2008, sentiment about the Australian and global economy has dived.
The last week-and-a-half has been torrid, with the ASX200 and All Ordinaries index finishing lower in seven out of eight sessions.
“I am unfortunately but justifiably pessimistic about the ASX at the moment due to the fact that ASX companies appear fairly growthless,” IG market strategist Evan Lucas told AAP.
The big banks have been a key, with all four down 15 per cent and Westpac more than 20 per cent worse, putting it in a bear market.
The run up in bank shares had been relentless and was viewed as having to end eventually, given Australia’s economic growth has been poor.
Still, the speed of the fall had been scary, said Mr Lucas.
Combine weak commodity prices, Australia’s heavily resources-weighted stock market and falls on offshore markets that the ASX was already underperforming and it had been a perfect storm, says Peter Esho, director of investment firm Esho Group.
While mining and energy stocks have struggled for a while, the previously favoured banks, utility, property trust, telco and healthcare have also all lost significant value.
A rush of profit downgrades in different sectors, including food wholesaler Metcash, engineers Qube and poker machine supplier Ainsworth Game in the last week alone, signifies broader problems.
The only companies that are growing their bottom line are doing it through consolidation and takeovers or getting rid of non-performing assets, says Mr Lucas.
“Topline growth is non-existent,” he said.
Mr Esho said he did not see a looming market recovery unless depressed resources stocks started picking up the slack, but there was no indication of iron ore, coal and oil prices jumping to support that.
While the top 30 largest stocks had driven the falls, there had been a flood of money taken out of resources and mining services companies out of the top 200 and a lot of wealth destruction, he said.
This week Australia notched up its highest monthly trade deficit on record, $3.89 billion in April, driven largely by a slump in coal and iron ore exports.
“For the market to turn around, for sentiment to turn around, for interest rates to turn around, the terms of trade to turn around we need to see commodity prices move,” he said.
CMC Markets chief market strategist Michael McCarthy disagrees, saying he would encourage investors to be bravely contrarian and buy resources stocks because they are at low prices.
He sees the market returning to 6000 points by calendar 2015’s end.
Add dividends and franking and the returns equal six per cent for the year.
“I think we are years away from a market boom, all the central bank stimulus has borrowed future growth, but things aren’t that bad either,” he said.