Markets collapse: why and what is worth doing?
Financial markets/economy
Posted by MoneyController on 06.08.2024
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There is already talk of a black Monday for stock markets with regard to yesterday, 5 August, during which the three major US indices confirmed the downward trajectory of the past few days: Dow Jones -2.6%, S&P 500 -3% and Nasdaq -3.4%.
Also weighing on the results of the US stock exchanges was the -12% fall recorded by the Nikkei, Japan's largest stock exchange: although the index recovered some of these losses today, it was the biggest drop in over forty years. Europe also experienced the repercussions of these strong corrections: the DAX 30 lost almost 5.6% in the last five days, the CAC 40 just over 4%, the FTSE 100 -3.4%.
There are two reasons that can explain the current slump or, at any rate, the sharp declines in the stock markets: the disappointing performance of US big tech and the Federal Reserve's failure to cut interest rates.
In the 'Corriere della Sera', Federico Fubini points out that the trajectory of the value of these companies (Apple, Amazon, Google, Meta, Microsoft, Nvidia and Tesla) conditions the performance of the stock markets: their value is approximately 13 trillion and corresponds to a quarter of the entire US stock market. A market that accounts for 70% of all global capitalisation. The corrections in these stocks were due to a) quarterly results below expectations, b) the combination of very high valuations and the disappointing results of the US economy and a certain cooling of enthusiasm for investments in artificial intelligence.
The second aspect that is mentioned as being responsible for this slump is the Federal Reserve's failure to cut rates. For some analysts, Jerome Powell and his staff would have got the forecast wrong and instead of a 'soft landing' (rate cut in a situation of economic growth) they would be faced with a 'hard landing' (rate cut in a situation of recession).
Many people are now wondering what to do: should they run for cover and sell their shares or hold on and wait for this situation to pass? Panicking is usually the worst course of action. The fact remains that, given that the markets are a very complex system and the needs of each saver are different, it is difficult and often impossible in certain situations to do without the advice of an expert or a financial advisor: this is what Daniele Manca says in "Corriere della Sera", which recalls the importance of the fundamentals of the assets in which one invests, whose evaluation can often only be done effectively by an expert; but turning to an advisor is also the only advice of a trader, whose opinion is reported by Massimo Basile in "La Repubblica".
Read also:
Markets in correction: recession coming?
Is the European economy and markets in danger of slowing down?
The next moves for the Fed and the consequences for the US stock market