Nowadays, the stock market is not behaving really very well. After years of an upward trajectory in the wake of a financial turmoil, Wall Street has again become unpredictable. The S&P 500, the Dow Jones Industrial Average and NASDAQ are all good in the red for the year and the stock market is potentially on track for its most terrible December since the depression period.
Numerous market measures show an economic slowdown could be on the horizon and various market experts are starting to sound the alarm. President Donald Trump who once was happy to tie his success to the stock market has gone silent on the matter except to try to persuade the Federal Reserve.
What goes up must come down…
At present, the economic expansion and stock market have been going on for so long that investors have been wondering when the luck would run out. It seems like a combination of international and domestic events are starting to persuade Wall Street that the time has come.
Donald Trump’s trade war with China is causing several issues ranging from its impact on US farmers to its immense potential to increase consumer prices to its economic effects in both the US and China. Economic growth has slowed down in Europe and it is expected to slow down in China next year. Drama over Brexit is causing waves as there are signals from the US Fed that it will continue to increase interest rates which would further dampen the stock market and economy at large.
The Stock Market is freaking itself out by freaking out
Since October, the stock market has become really volatile when whatever upcoming anxieties traders feel had begun to set in. Since then, the commotion has kept up in part since this has turned into some sort of self-fulfilling prediction.
Goldman Sachs in a note to clients warned that it may be the right time for investors to get defensive. Credit Suisse slashed its expectations for the S&P 500 in 2019, citing recent volatility. Market observers have begun to point to ‘death crosses’ which are stock charts that are supposed to indicate a sell off is approaching. The death cross occurs when a short-term trend tracker on a stock or index usually its 50-day moving average, crosses below its 200-day moving average which is a longer-term trend.
Chaos in the stock market can put anyone on edge but here is the thing. Stock market swings and corrections do happen and on an average, there are more up years than down years. From the time period of 1926-2017, the S&P delivered positive returns three-quarters of the time. In such positive years, it was up an average of 21% and in the negative years, it was below 14%.
If the downward trend continues, it will be the first time several millennial are experiencing a stock market downturn as they have had a stake in the game. This is definitely not deal, but not the end of the world for sure.