Why the ASX 200 tumbled lower on Monday and 2 shares to buy

The ASX 200 fell sharply again on Monday. This is why it tumbled lower and here are two ASX 200 shares which could be great options now…

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

After a reasonably subdued morning of trade, the S&P/ASX 200 Index (ASX: XJO) fell heavily in the afternoon to end the day notably lower.

The benchmark index tumbled a disappointing 2.2% to 5,719.8 points.

Why did the ASX 200 tumble lower?

Australian investors were selling off shares this afternoon after U.S. futures took a sharp turn.

At present, futures contracts are pointing to the Dow Jones opening the day 3.3% lower, the S&P 500 starting the week with a 2.8% decline, and the Nasdaq index opening 2.3% lower.

According to CNBC, stock futures fell heavily amid signs of a second wave of coronavirus cases in the United States as the economy reopens. This follows a spike in cases late last week in a number of states.

President and chief investment strategist, Ed Yardeni, from Yardeni Research, believes that investors got ahead of themselves in respect to the reopening.

Mr Yardeni said, courtesy of CNBC, that: "The meltup may need to take a break, as sentiment has turned too bullish too rapidly. Now that reopening is happening, there's fear of suboptimal results: less social distancing triggering a second wave of the virus, followed by another round of lockdowns."

Though, another lockdown seems unlikely based on what Treasury Secretary Steven Mnuchin told CNBC late last week. Mnuchin suggested that shutting down the economy again wasn't viable and would only "create more damage."

Is this a buying opportunity for Australian investors?

Unfortunately for Australian investors, we have a tendency to follow the lead of U.S. markets regardless of what is happening over here. This means that if the U.S. does struggle with a second wave, it could weigh on our market in the near term.

However, I wouldn't let this put you off investing. In fact, I would suggest you look to see if you like the look of any of the shares that have pulled back notably over the last few days.

Companies like Aristocrat Leisure Limited (ASX: ALL) and EML Payments Ltd (ASX: EML), for example, have fallen heavily since last week. I think this could be a buying opportunity for long term-focused investors. I feel both shares trade on attractive multiples relative to their long term earnings growth potential.

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Emerchants Limited. The Motley Fool Australia has recommended Emerchants Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

A man clenches his fists in excitement as gold coins fall from the sky.
Broker Notes

These ASX 200 shares could rise 20% to 35%

These shares are being tipped to deliver market-beating returns by analysts.

Read more »

Keyboard button with the word sell on it.
Broker Notes

8 ASX All Ords stocks downgraded to sell ratings

Find out which shares are out of favour with the experts.

Read more »

Woman smiling whilst shopping in a clothing store.
Dividend Investing

Why this quality ASX 300 dividend stock is tipped to surge 54%

A leading fund manager forecasts significant outperformance from this quality ASX 300 dividend stock.

Read more »

A group of businesspeople clapping.
Broker Notes

Bell Potter names more of the best ASX 200 stocks to buy in June

These stocks could be best buys this month according to the broker.

Read more »

A businessman looking at his digital tablet or strategy planning in hotel conference lobby. He is happy at achieving financial goals.
Share Market News

Why Clarity, Coronado Global, Iperionx, and Lynas shares are roaring higher today

These shares are having a strong session on Thursday. Why are investors buying them?

Read more »

A woman looks questioning as she puts a coin into a piggy bank.
Opinions

The ASX 200 is approaching its all-time high. Here's why I'm not buying shares

I'm not seeing what the broader market is.

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why Qantas, Resimac, Tyro, and Soul Patts shares are falling today

These shares are having a tough session today. But why?

Read more »

Happy coal miner.
Share Gainers

Up 75% this week, why is this ASX All Ords stock rocketing again today?

Investors are piling into this ASX 300 stock on Wednesday. But why?

Read more »