The ASX 200 is tanking, what can you do about it?

LiveWire

07 Mar

No doubt you’ve heard that stock markets around the world, and our own ASX 200, are sharply lower over the last 24-hours. You’ve probably checked your portfolio on your favourite market news platform ...

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You’ve probably checked your portfolio on your favourite market news platform ...</p>\n<a href=\"https://www.livewiremarkets.com/wires/the-asx-200-is-tanking-what-can-you-do-about-it\">Source Link</a>\n</div>\n</body></html>","source":"livewire_stock","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta content=\"text/html; charset=utf-8\" http-equiv=\"Content-Type\"/>\n<meta content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\" name=\"viewport\"/>\n<meta content=\"telephone=no,email=no,address=no\" name=\"format-detection\"/>\n<title>The ASX 200 is tanking, what can you do about it?</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nThe ASX 200 is tanking, what can you do about it?\n</h2>\n<h4 class=\"meta\">\n\n\n2025-03-07 13:32 GMT+8   <a href=\"https://www.livewiremarkets.com/wires/the-asx-200-is-tanking-what-can-you-do-about-it\"><strong>LiveWire</strong></a>\n</h4>\n</header>\n<article>\n<div>\n<p>No doubt you’ve heard that stock markets around the world, and our own ASX 200, are sharply lower over the last 24-hours. You’ve probably checked your portfolio on your favourite market news platform ...</p>\n<a href=\"https://www.livewiremarkets.com/wires/the-asx-200-is-tanking-what-can-you-do-about-it\">Source Link</a>\n</div>\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"SNAS.AU","symbol_name":"ETFS ULTRA SHOT NASDAQ 100 H","start_time":0,"source_url":"https://www.livewiremarkets.com/wires/the-asx-200-is-tanking-what-can-you-do-about-it","article_id":"2517173705","we_media_id":null,"thumbnails":[],"rights":{"source":"livewire_stock","url":"https://www.livewiremarkets.com/wires/the-asx-200-is-tanking-what-can-you-do-about-it","rn_cache_url":null,"directOrigin":true},"url":"https://stock-news.laohu8.com/highlight/detail?id=2517173705","pubTimestamp":1741325525,"columns":[],"sourceInfo":{"source_id":"livewire_stock","name":"Livewire Markets"},"weMediaInfo":null,"summary":"No doubt you’ve heard that stock markets around the world, and our own ASX 200, are sharply lower over the last 24-hours. You’ve probably checked your portfolio on your favourite market news platform (this one!It’s what you do next that’s important.Some will see the sea of red and promptly close the screen. “Hmmm…I’ll check back on that later…perhaps when the market goes back up.”If you’re reading this article, I’m guessing you’re the other type of investor. The one who wants to learn what to do about it.So, not even a correction yet, but the chart above of the ASX 200 Total Return Index  shows the recent dip is threatening to extend past the low of the last dip back in December. If it were to do that, technical analysts like","collect":0,"end_time":0,"defaultTopTitle":"livewiremarkets.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"SNAS.AU":"ETFS ULTRA SHOT NASDAQ 100 H","BK7095":"多种金属与采矿","BEAR.AU":"BETASHARES AUS EQ BEAR HF","BHP.AU":"BHP GROUP LTD","BK7142":"石油与天然气的勘探与生产","STO.AU":"SANTOS LIMITED","BBUS.AU":"BETASHARES US EQ STR BEAR-CH","BK7507":"资源股","BK7511":"ESG概念"},"translate_title":"ASX 200正在下沉，你能做些什么？","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"BBUS.AU":0.6,"BEAR.AU":0.6,"BHP.AU":0.6,"SNAS.AU":0.6,"STO.AU":0.6},"content_text":"No doubt you’ve heard that stock markets around the world, and our own ASX 200, are sharply lower over the last 24-hours. You’ve probably checked your portfolio on your favourite market news platform (this one!) and…\nDot, dot, dot.\nIt’s what you do next that’s important.\nSome will see the sea of red and promptly close the screen. “Hmmm…I’ll check back on that later…perhaps when the market goes back up.”\nIf you’re reading this article, I’m guessing you’re the other type of investor. The one who wants to learn what to do about it.\nEven better than what to do about it is how to prevent it from happening next time. You’ve come to the right place. Let’s investigate some of the strategies you can use to protect yourself from a market downturn, but for those who wish to go the extra step – potentially also how to profit from one.\nBut why? (Thanks America!)\nSo, what’s behind this latest tumble? A big chunk of the blame lies with the escalating Trump Trade War. With the Don back in the White House, Plan A on getting what he wants from his neighbours Canada and Mexico, and more broadly to make America great again (“MAGA”), is aggressive tariff threats.\nSo far, we’ve seen 25% slapped on Canada and Mexico, and an extra 10% on China. Tariffs can stymie global trade and push up the price of finished goods across the economy. Then there’s the DOGE cutbacks – the Department of Government Efficiency, a Trump-led initiative aiming to slash U.S. federal spending.\nAt home, Americans are growing more concerned that DOGE cutbacks will cost jobs, while tariffs will jack up prices, exacerbating cost-of-living pressures at a time when wallets are already stretched thin. We’ve all heard the saying that if the American economy sneezes, the rest of the world catches a cold!\nBack home, it’s feared that Australia, with its heavy reliance on commodity exports like iron ore and coal, will also feel the heat when trade tensions flare – particularly if China’s economy gets hurt in the process. While it’s early days, the uncertainty around how these new Trump Administration policies might ripple through global demand is spooking investors. Thanks America – you voted for him!\nBefore you hit the panic button\nOk, let’s take a step back and put recent market volatility in context. Markets go up, markets go down – it’s the nature of the beast! First, let’s define what we’re dealing with. In market lingo, a correction is a drop of 10% or more from a recent peak. Assuming today’s loss turns out around 1%, so far, the ASX 200 is down around 5.5% from its record high set on 14-Feb when adding back dividends.\n\n\n\n\n\n\n\n\n\nASX 200 Total Return Index chart, daily (click here for full size image)\nSo, not even a correction yet, but the chart above of the ASX 200 Total Return Index (just means adding back dividends to show the total performance of Aussie shares) shows the recent dip is threatening to extend past the low of the last dip back in December. If it were to do that, technical analysts like me could argue that at least the medium-term trend in Aussie stocks has turned down.\nA bear market, on the other hand, kicks in at a 20% plunge. Over the last 20 years, the ASX 200 has weathered its share of both corrections and bear markets. The Global Financial Crisis (“GFC”) in 2008-09 was the big one – a brutal bear market that saw the benchmark index crater over 50% from its 2007 peak. It took one month shy of six years to claw that back. More recently, the COVID crash of March 2020 saw a 36% plunge in just weeks – the recovery that time was 14 months.\nThere have been several smaller corrections, perhaps the two most notable being the 2015-16 correction that occurred on the back of concerns over Chinese government and property sector debt (arguably that item is still simmering!), and in 2022 on the back of concerns over central banks “lift off” on interest rate hikes.\n\n\n\n\n\n\n\n\n\nASX 200 Total Return Index chart, monthly (click here for full size image)\n\nTo be fair, as bad as things looked or felt on each of the above occasions, markets recovered and recovered well. It is a fact that the stock market has been one of the best tools investors have to build wealth over the long term. Having said this, what if one could avoid those inevitable bumps along the way? What if one could even profit from them?\nSo, what can you do about it?\nWhen stocks start sliding, it’s natural to feel stuck. Do you sell? Do you buy? Do you switch off the screens and hide under the bed? Here are three strategies to navigate this mess to consider – ranging from hands-off to the hands-on.\n\n\n1. The BHP technique\nLet’s start with the option most Aussie investors adopt in times of stock market crisis: the BHP Technique. No, it’s not named after the big Australian mining company – it stands for Buy, Hold-in-Hope, Pray.\nOk, I’m kidding a little here – but I propose the BHP Technique is the default option for many of us: you’ve got your CBA, your BHP (the stock!), your Woolies, maybe even an ASX 200 ETF. When the market tanks, you grit your teeth, hold on tight, and hope things eventually turn around (perhaps you also throw in a prayer to the market gods for good measure!).\nBut the BHP Technique isn’t entirely a joke. For long-term investors, riding out downturns often works. The ASX 200’s recovery post-GFC and post-COVID proves it. But! I suggest it’s not for the faint-hearted – watching your portfolio bleed red day after day tests your nerves – and then there’s the inevitable regret of “Why didn’t I get out earlier?”.\nMy main issue with the BHP Technique is the uncertainty and pain that comes with it. Using this method, when markets tank – we’re going to get emotional – and we rarely make good investing decisions when we’re emotional. I suspect some of you can remember a time where emotions caused you to sell right at the bottom…\n\n\n2. Hedging: Playing defence\nThe other issue I have with the BHP Technique is that it’s not difficult in modern markets to insure our portfolios against a market downturn. So, if sitting on your hands doesn’t cut it, you might look at hedging.\nHedging is a way to cushion your portfolio against a fall. Think of it like insurance: you pay a small amount now to avoid a bigger hit later. Two popular hedging tools used by Aussie investors are options and short-index ETFs.\nI’ll leave the investigation of the following options strategies to your research, but these hedging strategies have been used by generations of investors to protect them from both stock-specific and portfolio-wide risk:\n\nBuy stock specific put option (more comprehensive protection, specific to a holding, up-front cost or “premium”, time erosion works against position, risk limited to premium)\nBuy ASX 200 put option (more comprehensive protection, general/portfolio-wide protection, up-front cost, time erosion works against position, risk limited to premium)\nWrite stock specific call option (less comprehensive protection, specific to a holding, no up-front cost (receive premium at start), time erosion works in favour position, potentially unlimited risk)\nWrite ASX 200 call option (less comprehensive protection, general/portfolio-wide protection, receive premium at start, time erosion works in favour position, potentially unlimited risk)\n\nAlternatively, one can hedge by purchasing short-index ETFs. These have built into them options, futures, or other derivative instruments whose prices rise when the value of the index in question falls. For example, the price of an ASX 200 index short-ETF will rise as the value ASX 200 index falls.\nHere are few examples of short-index ETFs listed on the ASX that investors may look to purchase in times of growing market uncertainty to hedge their portfolios (it’s worth checking the prices of each of these today to see how they’re performing):\n\n\nBetaShares Australian Equities Bear Fund (ASX: BEAR)\n\n\nBetaShares U.S. Equities Strong Bear Hedge Fund (ASX: BBUS)\n\n\nGlobal X Ultra Short Nasdaq 100 Complex ETF (ASX: SNAS)\n\nKeep in mind there are no free lunches in markets. Hedging’s not foolproof. Timing it wrong or overpaying for protection can backfire. But for those with big ASX exposure, it’s a way to sleep easier when Trump makes his next big policy announcement.\n\n\n3. Be your own hedge fund: Short selling for profit\nNow, let’s crank it up a notch. Why just protect yourself when you could profit from the chaos? Welcome to being your own hedge fund – using short selling to hedge risk and potentially even make a profit as stocks tank.\nShort selling* is simple in theory: you borrow shares, sell them at today’s price, then buy them back cheaper later and return them, pocketing the difference.\nSay back on 20-Jan, you thought a particular stock was going to be hit hard by Trump’s tariffs; let’s call this stock Santos (ASX: STO). On 20-Jan you short sold 1,000 shares of STO at $7.29. Today, you checked your broking platform and it’s now trading at $6.09. You buy back the 1,000 STO shares (also known as “covering”) to close your short trade. Your initial credit on the 20-Jan sale was $7,290 and your debit on today’s purchase is $6,090 – meaning your short sale profit is $1,290.\nOf course, there are transaction and holding costs to consider, but the bottom line is you would have made over $1,200 on STO as it plunged by more than $1 in price. Keep in mind that everyone who employed the BHP Technique on STO over the same period just lost money. Well, we tried to tell them!\nThe catch? Consider what would happen if STO rocketed to $10 instead, you’d have to pay substantially more to buy it back than you received at the start of the trade. The difference would be your loss. There’s no reward without risk, and the goal with short selling is to increase one’s chances of success by targeting the weakest ASX stocks. In addition, it’s prudent to also adhere to strict risk management (think capital allocation and stop-losses here) – but this could be said of any investing methodology – even for the BHP Technique!\nConclusion: Volatility’s a beast – learn how to tame it\nEven the sharpest investors – from fundamentals guru Warren Buffett to technical traders like Paul Tudor Jones – can struggle when markets go haywire. But one can be sure that these legendary investors have a detailed and effective plan for how to protect their risk during market downturns, and how to profit from them.\nThe ASX 200 is tanking today, sure, but it’s not the first time and it certainly won’t be the last. Granted, history suggests it’ll recover eventually, and how you play it in the meantime – riding it out, hedging, or getting crafty with shorts – is up to you. Just don’t let panic take over (and please, consider stepping up your game from the BHP Technique!).\n\n*The short selling process is handled seamlessly behind the scenes by your broker. First, you’ll need to set up a “stock borrowing facility”. Generally, this is not something discount brokers do – but you can check. Many short sellers also use derivatives like options and contracts for difference (CFDs) to go short – but I will leave the investigation of these instruments to you.\n\n\n\nThis article first appeared on Market Index on Friday 7 March 2025.\n\n\n\nNever miss an update\n\n    Enjoy this wire? Hit the ‘like’ button to let us know. \n    Stay up to date with my current content by \n    following me below and you’ll be notified every time I post a wire","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"-1","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1}}}