The US Fed's failure to raise rates reinforces investor concerns about the health of the world economy, particularly China, said George Lucas, Instreet’s managing director.
Mr Lucas pointed out that the chair of the US Federal Reserve, Janet Yellen, has sought to calm markets by saying a US rate rise is likely to happen this year.
He noted her comments come after the Fed kept rates steady at its September meeting, which added to volatility in the market.
“Yellen’s recent comments calmed markets, but it seems to be a case of too little too late,” Mr Lucas said.
“Against this backdrop, China’s flash PMI falling from 47.3 in August to 47.0 in September doesn't help,” he added.
Unless SMSF investors are planning to hold for a medium- to long-term timeframe, they should be careful about “bottom picking” in the current market.
“Overall, it’s too hard to make a call at the moment because of volatility in all markets. We would advise caution on bargain hunting while the uncertainties remain,” Mr Lucas told SMSF Adviser.
These comments follow predictions from chief economist at BetaShares David Bassanese that the domestic market is only two thirds of the way through its correction.
“It’s hard to think that the worst is over. The market has corrected, but it’s not super cheap,” Mr Bassanese told SMSF Adviser.
“Earnings remain under pressure, the US is [probably] going to raise interest rates and we’re still not seeing a lot of clarity in terms of the Chinese outlook or how the Chinese authorities are responding to this slowdown.
“There’s more negatives than positives floating around at the moment, so it’s hard to believe we’ve seen the worst at this stage.”