The investors in the US markets have been punished badly yesterday as the markets witnessed the significant downtrend dashing investors’ positive sentiments. Even though the markets were largely perceived as “uncertain” by the global investors lately, yesterday’s significant sell-off had adversely affected investors’ portfolio. In the initial time of 2018, the technology stocks were regarded as the safety zone they were witnessing the positive momentum. However, it seems Mr. Market has taken that crown from the technology stocks as they witnessed a steep sell-off on October 24, 2018. NASDAQ Composite, an index with which most of the tech stocks have tied their fate, witnessed a substantial decline and ended the day at 7,108.40 implying a steep decline of 329.14 points or 4.43%. Therefore, it can be said that NASDAQ Composite has indeed entered a correction zone.
This huge sell-off in the US equities might mean that the investors need to know that a lot more is still in store and that they need to think twice before they deploy their funds in the equities. The primary reason which negatively impacted the US markets and pulled them to the correction zone was concerns related to the US economy as well as corporate earnings that would be impacted amid the trade battle going on. However, other factors like fears related to the weakening of the Chinese economy as well as hawkish view of the Federal Reserve weighed on the investors’ sentiments.
Apart from the tech stocks, the negative momentum was also visible in the media and communication stocks. However, stocks of healthcare, banks as well as industrial companies have also witnessed a huge sell-off. Lower-than-expected result as well as weaker outlook adversely affected the investors’ minds raising a big question mark that whether or not the companies would be able to report future growth in the corporate profits. The prices of the bonds have been witnessing an uptrend which means that their yields have been falling (inverse relationship between bond prices and yields).
Moreover, the traders in the US companies are also worried about the inflation, trade disputes as well as interest rate environment. Companies like 3M as well as Caterpillar failed to impress the market players with their results and have given a heads up about the increased costs amidst trade fight between the United States and China. With the sell-off in the markets, the market participants have decided to deploy their capital in the safe-havens like debt products. As a result, a rise was witnessed in the bond prices resulting in the falling yields. Some of the market participants have started viewing that the Federal Reserve might give a thought to its policy of quantitative tightening if the US economy continues to show the signs of downtrend. The global economists are of the views that the US economy might experience a slowdown in 2019 because the effects of the higher government spending as well as tax cuts are now fading. Bottomline, it could be said that the global markets are in a zone in which deploying the money could cause a real harm to the investors. Therefore, they need to take a call after careful consideration.
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