At the least expected moment for investors, a new “Black Monday” has emerged on international stock markets. The start of the week could not have started worse for the financial markets of variable income. Where the powerful index Dow Jones it was left around 5%. One of the most serious falls in its history and whose intensity has not been remembered since 2011, in the midst of a recessive state of the economy. This decline, on the other hand, has spread to other markets, such as Asia and Europe. In any case, concern has re-installed among stock market users.
This depreciation in the stock market, especially the North American one, has surprised a good part of the financial analysts. Because the evolution of North American equities was impeccable until now. Beating day after day the all-time highs and become one of the most profitable financial markets in the world. With a profitability that in the last ten years has approached 100%. It is true that some kind of correction was expected, but not as violent a movement as the one that has developed this week.
The selling current has clearly imposed itself on the buying positions. But the novelty this time has been in the intensity of these positions. To the point that it has surprised many small and medium investors with a changed foot. Now what we are trying to analyze is whether this drop is an isolated and specific event or is it something much more important. That is, the beginning of a downtrend that can have very negative effects on investors' positions. This is one of the keys that financial agents are asking themselves these days.
Reasons for crack in the United States
Losing 5% in a single trading session are big words when it comes to equities. In any case, the initial, and apparent reason, for this collapse of the United States stock market is linked to the decision on the rise in interest rates. Now it seems that it will not be progressively, as investors had assumed. If not that may be messier and faster than you might expect. It is a fear that is present at the moment in a good part of the small and medium investors and that has been transferred to the equity markets.
Well, everything seems to indicate that the North American economy is going like a shot, as indicated by most of its macroeconomic indices. But with a small nuance, and that is that there are indications that a certain warming may be taking place in it. And this important factor can have perverse effects on the application of interest rate measures on the other side of the Atlantic. And this fear has been revealed to the stock markets. This is how this drop of nothing less and nothing more than 5% is explained.
What will happen to interest rates?
In any case, there is one thing that has become very clear and that is that the decision on interest rates in the United States, it continues to be decisive for the evolution of equity markets. This has been revealed with great virulence during these days. With a selling pressure that has not been seen in years, at least in the American stock markets. With the biggest drop ever recorded in the Dow Jones. A factor that has encouraged the most pessimistic of the financial markets to continue with their strategies of being in liquidity in the equity markets.
In any case, European stocks fell around 2%, dragged down by the biggest drop in points recorded by the Dow Jones. With a very direct link with respect to the share prices in the other major international financial market. To the point of highlighting the great interrelation that exists at the moment with these financial assets. Not in vain, Asian markets They have also left about 4% on average in these first two days of the week. Now it will only be necessary to check if these falls in the main world indices will have more extension during the next days.
Downs that extend to Europe
Not only the American stock market has gone badly these days. If not, on the contrary, in the old continent this shake has also been reflected in the world of the stock market. As a consequence, the French CAC 40 was down 2,35%; the British FTSE, 2,64%; the Dax of Frankfurt, 2,32% and the MIB of Milan, 1,52%. With regard to the Spanish stock market, it must be said that it has maintained this same line when the Ibex 35 2,5%. With futures in the red in all markets, what are doubtful portends more falls during the week. Although they may not be of the same intensity as Monday.
In any case, it is not the only financial market that has lost value in these critical days for all investors. Another major affected has been oil, since the barrel brent, the benchmark in Europe, has remained just above $ 67. With a drop in the value of its price of 0,70%. However, it has not been as dramatic as in the case of the main international indices. With a much more limited impact until now.
Sovereign bond position
Another of the collateral effects of this major collapse in equities around the world has materialized in the bonos. Because in effect, from this new perspective on investment, the US bond has stood out these days by marking an interest of 2,7%, which contrasts with the profitability that the German bond is offering these days, which moves in a band that has as average 0,7%. These prices anticipate a future rate hike, which is the main fear that financial markets have. And where this collapse of equities in the United States is concentrated and to a lesser extent than in other geographical areas of the world.
Therefore, this drop in the stock market can also be interpreted as a mere collection of profits in the US stock market. Although with much more important connotations from other investment points of view. In this sense, you cannot forget from now on that there has been a change of owner in the monetary politics across the Atlantic. And this is a factor that can cause mistrust among small and medium investors.
Change of course at the FED
Nor can it be forgotten that Federal Reserve of the United States (FED) assumes a new presidency and this always sows a certain resentment in the financial markets. On the measures that can be taken in monetary matters and very especially linked to interest rates. Some of this also has to do with the stock market crash earlier in the week. Not surprisingly, it is beginning to be assumed that the new head of the Fed, Jerome Powell, may carry out some kind of very aggressive monetary movements when he has just arrived in office. Because if this is the case, this depreciation in the equity markets would not be punctual. If not as the prelude to new cuts and maybe even more intense in terms of its main effects.
On the other hand, it is not ruled out that the stock market continues to add value to your investments, but one thing is very certain and that is that volatility has reached the stock markets of almost everyone again. The evolution of VIX index This is demonstrated in these two days, with a more than notable rebound in their levels. Of course, you cannot forget that what this index directly linked to the stock market measures is investors' fear. And right now what he is saying is that there is a lot.
New business opportunities
Although if you invest in this benchmark, do not doubt that you will be able to earn a lot of money from now on if the instability in the financial markets is a reality. Although with a great risk in operations since it is necessary to provide a lot of experience in this kind of very special movements from all points of view. In any case, the current new year has started more moved than was anticipated from the beginning.
Where, without a doubt, business opportunities will continue to emerge, even if things get worse in the stock market in the remainder of the year. At least it is a new scenario that you did not have to formalize your operations on the stock market. Because at the end of the day this is the bag. Where you can earn a lot of money, but also leave a lot of euros on the road.