The markets crash this week is, I believe, timely for long-term investors and the global economy.

Here’s why.

Following ‘Black Monday’ when China’s benchmark index dropped by 8.5 per cent, leading to falls in Australian, Japanese and South Korean markets, as well as similar reactions in the U.S. and Europe, the volatility continued throughout the week.
Even though today China’s shares closed 5 per cent higher following this week’s huge losses – up by 156.3 points to 3,083.59 – this is little solace in the face of the massive losses and worldwide shockwaves seen since ‘Black Monday’.

However, as it stands, this week’s events could prove to be opportune for long-term investors and the global economy.

In the first instance, the majority of the world’s markets were well overdue a correction.  Looking at the U.S., there have been long time periods of relatively low volatility as stocks enter their seventh bull year – which usually last eight years – in May.  Therefore looking long-term, a market correction is certainly due.

Bear markets on the other hand typically range from nine to 18 months.  Which is why long-term investors should now continue strategic buying and avoid panic-selling, as we could well see the end of the bull market at the start of 2016.

Secondly, I am of the opinion that this week’s events will be good for the global economy in a wider context.  Why? Well, the Federal Reserve and Bank of England are now much less likely to increase interest rates this year.  When they do they are perhaps going to take a more cautious, levelled approach.

Raising interest rates could lead to a series of grave consequences.  These include encouraging further deflation, making it more costly for businesses to invest and implement job creation, and also strengthening the dollar, which will adversely affect U.S. exports and global growth.

Therefore the Fed and Bank of England can now look at whether a looming interest rate rise is indeed necessary.  This was echoed by U.S. Federal Reserve official, William Dudley, who said this week that a rate rise is now “less compelling.”

Should China’s stock market have fallen following a rate rise, then the subsequent fallout could have been far more damaging.

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