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More of the same

More of the same

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Investors may have to wait for global markets to recover

The recent G20 summit was touted as a "make or break" effort to rescue the world's flagging economy, and US President Barrack Obama even called the meeting "historic".

But what difference has the event - which was attended by a group of 20 of the world's leaders - really made to ordinary people like you and me?

And, now that the summit in London is over, what action should we choose to take following its many discussions?

To begin with, we need to ask if the strategies proposed by world leaders would actually do anything to improve the global financial outlook. And on this particular point there appears to be huge differences of opinion.  

In an interview on a business news program shortly after the summit had concluded, one pundit appeared to infer that the G20 summit would have some positive results but there would still be "a lot of crunch and not much credit" when it comes to the world's financial markets.

Nevertheless, almost immediately after the summit the world's stock markets staged a rally - this was in the wake of the announcement that world leaders had pledged a total of US$1.1 trillion in funding to tackle the global financial crisis. (This included $750 billion to be donated to the International Monetary Fund, $250 billion to assist global trade and $100 billion to be made available for loans to some of the world's poorest countries.)   

The $1.1 trillion pledge was considered a massive amount and one that had the world's media talking for days after the actual summit had concluded.   

For some - especially those under the impression that the global financial crisis is being caused by a lack of confidence in the world's institutions - it was considered a very big deal.

In the aftermath of the summit, there appeared to be a lot of talk as to whether the market had actually bottomed out and whether those all important "green shoots" had started to appear.

But almost as soon as the television commentators started talking about "signs of economic recovery", the market once again took a turn for the worse.

So, despite the fact that the summit did provide some welcome respite, it was not enough to cancel out the bad news that many were expecting to hear during "earnings season" - the reporting season that actually started in the middle of last week and continues into next.

Right across the globe, company results are expected to be poor and so are their outlooks.

The markets are already reacting to the dire forecasts and have factored in the losses even before results are announced. Accordingly, the markets have already lost some of the gains they had previously made.

So what can we expect after the G20 summit?

For the time being it appears that the volatility that has plagued the markets throughout last year and into 2009 is here to stay.

So, with this in mind, what should we as investors do?

Probably the best advice is to continue to "drip feed" investments on a monthly basis to take advantage of US dollar cost averaging. By investing a set amount each month we are able to take advantage of market fluctuations.

Dollar cost averaging allows us to buy more units or shares when the market is down and less when the market is high.

By taking this approach we protect ourselves from the wild swings that look set to continue as a result of the global financial crisis, a situation that is likely to impact financial markets for some time.

_______________________________________
Trevor Keidan is managing director of

Infinity Financial Solutions. Should you

wish to contact Trevor please email [email protected]

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