The S&P/ASX 200 Index (INDEXASX: XJO) saw a further slide in value today, closing 3.60% lower after solid overall market gains yesterday.
It's important to remember that the ASX is coming off all-time highs and we have had a very solid 10 years of gains since the GFC. So, a significant market correction is not surprising.
I think a lot of the selling right now is more linked to panic rather than being based on rational thought processes. Also, high-frequency trading driven by computer algorithms is a common tool used in trading these days and this can make the swings on the market even worse.
Share markets can see major corrections in the short term like we are now experiencing. However, if we look at the history of the share market over the past century, it shows us that the market always bounces back eventually. The trend in the market has always been upwards over the longer term.
We don't know if we have actually hit the bottom yet in this current correction. But what we do know for certain right now is that with share prices down significantly on what they were a couple of weeks ago, the price-to-earnings (P/E) ratios of most shares are now lower. This means that shares can be purchased at much more favourable prices.
With that in mind, here's where I'd be looking to invest $2,000 on the ASX right now in light of the current market turmoil.
REA Group Limited (ASX: REA)
REA Group has seen an 18.4% decline in its share price since the current ASX correction began. Despite this fall, the fundamentals of REA are still the same. It still remains a profitable and well-run company with a good future ahead of it and, in my view, is well-positioned to capitalise on the improving outlook in the Australian residential property sector.
According to recent figures from CoreLogic, national house prices grew strongly by another 1.1% in February. Sydney house prices and Melbourne house prices showed particularly strong gains.
I believe that the recent interest rate cut by the RBA will also add more fuel for further house price rises over the months to come, which should translate to strong growth for REA Group over the next 12 months.
Macquarie Group Ltd (ASX: MQG)
Macquarie also has seen a significant correction to its share price of 19.8% since February 20 and its share price has been quite volatile in this time. I think that Macquarie's international exposure has spooked some investors over the short term. However, in my mind, this presents a good buying opportunity for investors with a long-term investment horizon.
Macquarie has become a more balanced and diversified business rather than one heavily focused on a small core group of operations. On the whole, I believe the company is well placed for strong growth.
