Yesterday’s stock prices plunged spurring talks of a panic and comeuppance for the nearly 10-year old bull market. The sudden 832 point drop in the Dow set people on edge, and here’s why it happened seemingly out of nowhere.
While there’s never a perfect answer to explain how the market can just turn on a dime with a big decline in popular technology stocks, financial pros are attempting to make some sense of the worst day for the Dow since February, reported USA Today.
The basic simple explanation appears to be that interest rates hikes and the ongoing trade war are sparking the fears. The 10-year Treasury note’s key rate impacts the pricing on things ranging from fixed-rate mortgages to stocks to virtually every financial asset on the planet and it recently climbed above 3.25 percent for the first time since May 2011. When you couple the threat of higher borrowing costs on things like houses and cars and corporate debt to the economic obstacles caused by the U.S. trade war with China, all it takes is a second of weakness to set a major sell-off in motion.
Market investors are currently fearing the higher rates, which will bump up the cost of loans ensuring consumers have less disposable income in the very near future. Plus, with the costs of goods and services on the rise because of the tariffs imposed on imported Chinese goods, it won’t take long for the average American to feel the pinch, let alone investors.
“These developments are telling us that the investment environment has become riskier,” says Ed Yardeni, chief investment strategist at Yardeni Research. “Fear is rising,” says David Kotok, chief investment officer at Cumberland Advisors in Sarasota, Florida, according to USA Today. “Investors are getting a wake-up call.” Kotok went as far as to predict that a full-fledged market “correction,” or a drop of 10 percent, is underway. After its drop of more than 3 percent Wednesday, the broad U.S. market, as measured by the Standard & Poor’s 500, is now 4.9 percent off its September 20 record high.
The major worry weighing on stocks is that economic growth will slow if borrowing costs continue to spike, analysts say. Economic growth has no option but to slow should rising prices and rising borrowing costs persist. “The markets are flushing out (economic) slowdowns to come” around the globe, says Gary Kaltbaum, president of the money-management firm Katlbaum Asset Management.
Another reason why the stock market struggles, is that some investors, reacting to negative earnings commentary from some companies, are unwilling to hold stocks in case results come in worse than expected, says Paul Hickey, co-founder of Bespoke Investment Group in New York.
By next Monday it will be back up.
No one should be surprised.The current decline is a CORRECTION that may resemble fits and starts as the PTB ratchet the markets down. Some of you may remember that I warned this community last month of the real possibility of this correction when I cautioned: “October looms”.
Yeah, it’s in the archives. 🙂
Fidelity guy literally got smart with me and acted pissed when I declined his advice on the blended 2035 K fund and wanted to go low risk govt money market fund for now. I told him the business cycle to go down is past due and I’ll ride it safely for now, or at a bare minimmum until a bit after the elections before possibly changing. I’d love to see a 40% correction now and jump in on the aggressive blue chip and S&P options they have with 10% contribution weekly.
The stock market goes up and the stock market goes down. Repeat as often as necessary. Some folks will have hard times and others may prosper.
And then there’s the fact that all our markets are manipulated by the banksters
I have been expecting this move to influence the coming elections in favor of the Democrats. It is a purely political move on the part of the Fed. All recessions are caused by the Fed and result in the early death by suicide and stress of at least 50,000 Americans. The fed has killed more Americans in total than all our wars combined. They know that these deaths will result due to their actions and they do not care. Millions of marriages have failed do to the created recessions. The banks know in advance it is coming and position themselves to make billions.
The market is shedding some today but no doubt what you say has a ring of truth. The peasants will always suffer.
You got it exactly! They CERTAINLY could have waited another month before raising the rates! It ABSOLUTELY was a demorat move to influence the election! I don’t think it will work.
“Yesterday’s stock prices plunged…”
Plunged? I wouldn’t call a 3% fall a plunge. Just a minor correction.
Enough of the fear mongering bullshit please!
If it drops 100 points a day for the next 3 weeks, is that fear mongering?
It’s a big point drop, but like Infidel says, it’s only a small percentage drop.
It was probably good to be in stocks…since the last GFC they have gone way up. I listened to most preppers and didn’t participate. My loss. Tried to tell the wife not to participate but she didn’t listen. She made a good bit of paper profit. Hope she can keep it for another year until she can withdraw it and hide it in #10 cans.
Anyway, I started out with nuthin’ and I got most of it left…
All wars are economic wars, which translates to banker wars. The people are powerless in the face of all out corruption. Go along to get along though that’s not part of the plan. Thee who die with the most cash win, monopoly on crack. The rest are just dirt and of no concern.
“What will the stock market do?”
“The stock market will fluctuate.”
There are more important things to put your attention on than the stock market. Here is something to think about. Many bottles of honey sold in the USA are mixed with high froctose corn syrup or other things like water and thickeners. So either start bee keeping or find a local bee keeper. There is a honey sold in Texas that supplies a certificate showing several labs tested the purity and quality of it’s 100% honey. Round Rock Honey.
The stock market will fluctuate towards a downward descent.
another 545 point drop today….
Between a Rock and a hard place