The major stock indexes of USA for one day has shown a record decline. What is behind the collapse of stock indices around the world: temporary correction or is it the beginning of “blow” big stock bubble that could lead to a full-scale crisis like the one that erupted 10 years ago? With these questions we addressed to financial analysts.
5 Feb industrial Dow Jones covering the 30 largest U.S. companies, fell to historic 4.6 percent. Kept pace with him and S&P in the basket which included 500 companies with the largest capitalization. His fall was 4.1%. Broke the record well as the NASDAQ, specializing in high-tech stocks and 3.78%.
After us indexes fell, the Japanese Nikkie, which shows the average stock price of 225 most actively traded companies on the Tokyo stock exchange. He fell by 4.73%.
Vadim Merkulov, a senior analyst IC “freedom Finance»“We are seeing the highest historical drop in the us stock indices. The reason was fear of accelerating inflation, and as a result, a more rapid increase in rates of the Federal reserve system of the United States.
Another factor is the prior strong growth of the us stock indices (for example, from the beginning, 7% in S&P500), without the presence of strong drivers.
The trend intensified on Monday, February 5, a break of important technical levels – which is only exacerbated by the situation because there’s a snowball effect for no apparent fundamental reason. Fear feat speculators to close positions which have been increased recently. Investors believe the market is overly Kareem kniesel to optimism. Now, however, optimism gave way to fear. which led to the big drop.
Asian markets also supported yesterday’s fall of us stock indices. The Nikkei Stock Average lost nearly 8% over the last 3 hours of the trading session, although the fundamental reasons for such a fall was not serious. I believe that this trend is short-term, and is more for technical reasons, as the fundamental investor concerns are already embedded in the price of quotations on Friday.
The current strategy is to wait out the dramatic fall and then start again gradually buy the stock. Change the negative trend can occur even within one trading day, so I advise you not to succumb prematurely to panic and to follow closely the movement in the market.”
Timur Nigmatullin analyst “Discovery Broker»“The current decline in the indices we characterize this as a mild panic in the background of the simultaneous impact of several negative factors. First and foremost, it should be noted strongly overheated U.S. stock market. Accelerating GDP growth and tax reform in the United States has led to the fact that the stock price far from their intrinsic value. For example, if it is to buy a portfolio of stocks from the S&P500 index and these companies would pay all of its net profit as dividends, such investment would give a return of 4% per year.
For comparison, the rate hike by the fed has led to the fact that the us 10-year government bonds give a yield of 2.8% per annum is virtually zero, unlike a stock, a risk. I think that for an increasingly wide range of investors, the choice between these two asset classes becomes more apparent.
In addition, it is worth noting the negative news flow, which is exacerbated by the situation: change of head of the fed, tough rhetoric trump on external trade with China and the EU, tightening of the fed”s parameters, the stress tests for us banks, etc.
As the U.S. economy increases its growth rate, the decline in profits is unlikely. In such conditions one should not expect a protracted decline in the stock market. However, most likely, the current correction will mark the transition of the overheated market in “sideways”, and I would not expect from him the past growth rate in the next few years.”