Pessimism is rife as global stock markets reel from the plunges since the beginning of the year, with the Royal Bank of Scotland (RBS) recommending to its clients that they "sell everything except high-quality bonds".
But according to AMP Capital chief economist Shane Oliver, there are seven reasons investors should "not be too concerned".
First, the falls in Chinese shares are more to do with regulatory issues and currency than fears about the economy.
"Recent economic data out of China has been mixed rather than outright negative," Mr Oliver said.
"Our view remains that Chinese growth this year will come in around 6.5 per cent and ongoing stimulus measures appear to be gaining some traction in helping ensure this."
Second, a US recession is "unlikely", he said – which, historically, means that any slump in shares will be shorter and shallower than if there were a recession.
"Most economic indicators in the US are okay highlighted by continuing strong jobs data which is serving to keep consumer spending firing even though the strong US dollar has damped US manufacturing," Mr Oliver said.
Third, "okay" economic date out of China and the US combined with good eurozone indicators suggest the global economy is unlikely to plunge into recession, he said.
Fourth, the current situation is "very different" to the GFC because lower oil prices and commodity prices are providing a "huge boost" to consumers and most businesses, Mr Oliver said.
Fifth, monetary policy remains "ultra easy", with the US Federal Reserve "very unlikely" to undertake the four rate hikes its 'blue dots' are indicating in 2016.
Sixth, the sharp falls in share markets have made valuations become "quite attractive".
"The gap between the grossed up dividend yield on Australian shares, which is now nearly 7.0 per cent, and term deposit rates, around 2.5 per cent, is back to around its highest level since the GFC," Mr Oliver said.
He concluded that there is a "lot of pessimism around", referencing the RBS call to "sell everything".
"In some ways this is a negative as it is creating more fear amongst investors, but the flipside though is that when everyone fears the worst, often the surprise is that things turn out to be better," Mr Oliver said.
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