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IT HAS BEEN a punishing 24 hours for the world’s stock markets.
Last night, the US Dow Jones reported its largest ever single-day loss. That’s right, its largest ever.
Other markets across the globe have responded with the resultant snowball effect being felt across the board – with Asian markets, and Japan’s Nikkei index in particular, having taken a proper battering.
As of this morning, all euro markets are down over 3%, although they appear to be recovering slightly as the morning progresses. It’s been the worst 24 hours of European trading since the Brexit vote of 2016, with the UK FTSE index down 250 points as the sun came up, on the back of the chaos seen in Asia.
Meanwhile, Ireland’s own ISEQ index was down 1.9% after yesterday’s trading.
But with the recession of the last decade a receding memory, and Donald Trump telling anyone who’ll listen (which is everyone) that the US economy is seeing landmark gains under his stewardship, why is everything seemingly suddenly falling apart? And should we be worried?
Well no, you probably don’t need to lose too much sleep over what’s going on.
Firstly, you have to take into account that growing wages and a resurgent economy, which are being seen in industrialised nations around the world, are not necessarily what a stock market likes to see, in absolute terms.
Those two indicators suggest that the various financial stimulus measures (such as the EU’s programme of quantitative easing) put in place by governments and central banks across the globe, to pull themselves out of the recession and encourage new growth, have been having their desired effect.
And that means that they may (a) be taken away, and (b) could lead to interest hikes on the part of central banks, in order to get their economies on an even keel (non-stop growth being non-sustainable). Which leads to spooked investors, who fear volatility above all else, and the kind of snowball effect seen so dramatically in the past 24 hours.
However, that isn’t the end of the world – it’s not a sign of recession, or tanking economies. It makes more sense to see it as the various markets ‘correcting’ themselves after surges in growth that were not necessarily representative of reality.
So you can see what’s happening as global investors getting out while they’re ahead, as it were.
Good news / Bad news
“Basically, good news regarding the performance of the global economy means bad news for stock markets,” says Conall MacCoille, analyst with Davy Stockbrokers.
With the US wage market up 2.9% at the moment, then you have two separate PMI (Purchasing Managers’ Index – measures by which analysts judge how an industry is doing) surveys in the past month – the main reason you’re seeing equity markets down is that people believe that the stimulus measures that had been put in place, such as quantitative easing, will now be taken away.
So you can see what’s been happening in the past day as a sort of pre-emptive strike on behalf of the markets, who want to cut their losses before ‘corrective’ punitive measures are put in place.
“It’s true that the Dow is down 4.6% in a day,” says MacCoille. “But it’s only down 1.8% overall for 2018, which isn’t quite so dramatic.”
One thing’s for sure, the US president’s reaction to the day of carnage will be interesting – the Dow Jones has grown by 5,000 points since Trump took office, after passing 20,000 for the first time in the aftermath of his election. Yesterday it wiped out nearly its entire growth from 2018. You suspect he may not be volunteering to take the blame.
“With the various stimulus programmes in place things were being over-valued,” says MacCoille. “There were two interest hikes projected by the US Fed (the Treasury, which administers the American economy) for this year, if things had kept growing there would have been even more.
And with interest rates at close to zero investors couldn’t get a return on a bond. Equity values were very frothy over where they should have been. And that all lead to a concern in the markets.
MacCoille says that “you tend to get these corrections, it’s probably not a bad thing”.
“And it’s not a bank crash or anything like that.”
And breathe.
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Last time I saw that happen was here with a BOI Insurance sponsored story. It came up late at night and in minutes all the comments lashed out at the bank. In an hour the article went away quitely in the night.
Bankers really do not know how much they are hated.
Sure what did they expect being financial terrorists and all
Financial terrorists, good one!
Freedom fighters
JP Morgan have destroyed a lot of countries in the world, greedy sons of b****es that will stop at nothing for more wealth. They are one of the 14 banks in the us that own the FEDThey own companies all over the world. There the biggest shareholders in BP, and a number of key mining and oil companies. They don’t just do banking. They are corrupt and trade inside illegially. They cause more misery in the world than some of the worst governments.
Well said ned, its been pushed by some countries and companies that the dollar should end as a world reserve currency. This would put a major obstacle in the way of JPM and the corrupt federal reserve. The dollar has been washed away to the extent its not even worth paper and the only way to keep it as a world reserve is corrupt low tactics.
They also funded the Nazis. Their major shareholders are the puppet masters.
if you’ve seen the movie “wall street” made in 1987. At the very start the first lines of the movie are “The biggest mistake we ever made was letting Nixon get off the gold standard”. This refers to 1972 when the dollar was backed by gold,
To explain after WW2, the dollar was the world currency and if you had a dollar bill the US Federal Reserve would of given you gold instead of your dollar bill if you wanted to cash it in. The Nixon shock was when france wanted to cash in the dollars they had for gold and the US FED didn’t have enough gold to give them.
The Nixon shock was when he convinced the middle east countries to trade oil for dollars only. saving the dollar and creating the petrodollar. Since then the only value dollars have are the paper there printed. the dollar is going to crashing down. like MrKnow said its only worth paper…
Russia have introduced a bill to ban dollars from use in the country. Many more countries are following suit. The dollar is dying………… But you won’t find that news on the Journal or any other irish or UK media sources.
@Dairmuid very well said, a lot of people don’t understand how the petrodollar works, when we hear about the fall of saddam and gadaffi we hear the bull that the western media feed us! But their is a way bigger story to why these leaders and their countries fell and thats why the petrodollar needs to end.
Russia and china are being slammed because of their calls for the US dollar to end as a world reserve and their (especially russia) plans to ban dollars and the depending if it to trade. They know the dollar will eventually end its domance and if economy’s around the world don’t prepare they will crash with the dollars eventual end.
China is thought to have the biggest stock of gold, they also own the biggest percentage of American dept. By all right the yen should be a world currency because they can backup their dept, don’t see why the world should suffer economic disaster because the US wants the dollar as a world reserve.
No doubt we will see more sabotage and sanctions put on countries that threaten the dollars role in the world, I suspect Russia, china and the US will enter a eco war to change things. I also think the free trade with Europe is too little too late and will impact Europe in a negative way when the dollar falls from glory.
People have different theories on this and rightfully so, thats just mine.
I love them and have shares :) they make me money and at the end of the day that’s all that matters.
JP Morgan, only outdone for cheating, manipulating and stealing, by Goldman Sachs.
A book well worth reading : Money and power : How Goldman Sachs came to rule the world.
“From the outside, Goldman Sachs is a perfect company. The Goldman PR machine loudly declares it to be smarter, more ethical, and more profitable than all of its competitors. Behind closed doors, however, ! etc, etc”
Author , William Cohen worked on Wall Street for 17 years.
JPM
S C U M of the earth
Just check out the total in fines over just the last few years, for FRAUD and market manipulation.
What did they expect ??
A group hug ?
#fail
A rake?
What’s the conversion rate for the rake? How many rakes to the pile?
Shouldnt bother interacting with the nobody keyboard warriors. Don’t interact with those beneath you they are simply inferior and worthless
Well done Kenneth posted like a real “keyboard warrior”
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