Stock markets around the world are falling, driven by fears that arise from the US.
Analysts are trying to find out if this is a short-term correction for markets that recently reached record levels or a sign of deeper concerns. This is what you need to know:
What’s going on?
Markets USA. They remain volatile after the opening bell. Markets in Asia and Europe are falling this Tuesday. Japan’s Nikkei fell 4.7%, Hong Kong shares fell 5.1% and London’s FTSE 100 fell almost 2%.
Those falls come after a harrowing day for investors in the United States, where the Dow plummeted 1,175 points or 4.6%. It was the largest decline in the index in a single day.
Treasury Secretary Steven Mnuchin said Monday that the stock market is “working very well.”
“We are monitoring the markets, they are working well, we still believe in the long-term impact of the stock market,” he added.
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Why is the Dow falling?
There are concerns that the US Federal Reserve raise interest rates faster than expected There are concerns about the stock market It could be a correction of 5 to 10% Keep this in mind If you have a 401k, do not register today If you have a well-designed portfolio for your retirement, do not worry If you are close to withdrawing, do not put all your money in the stock market If you have money that you cannot lose, do not put it in the market In short: things are volatile and do not know how things will end today. BUT, the economy is strong, employment is strong.
Why is it happening?
There are a lot of worries about fueling sales. One is the concern that the US Federal Reserve raise interest rates faster than expected. That was triggered by US employment data. This Friday they showed that wage growth is improving, which could mean faster inflation.
When interest rates rise sharply, stocks often fall. Higher rates can consume corporate profits. The increase in rates and inflation can also cause problems in the bond markets.
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Experts have repeatedly warned in recent months that both the stock and bond markets were getting too hot. And some analysts say that the current losses could be even good.
“This correction is a healthy development for the markets in the long term, and the bullish stock market, although bloody, is not broken,” wrote Scott Minerd, director of global investments at Guggenheim Partners, in a research note on Monday.
Why the US problems? Affect in global markets?
The United States is the largest economy in the world and the home of the largest financial markets on the planet. The dollar is the reference currency for investors around the world.
What happens on Wall Street almost inevitably spreads throughout the world. Markets in other global financial centers, such as London and Tokyo, are particularly sensitive to this.
But more closed systems, such as China, are often less affected. Stocks in Shanghai have fallen 2.2% since Thursday, compared to 8% in Tokyo.
How worried should you be?
It depends on who you ask. But assuming that the current stock market crash is a short-term decline rather than a signal of deeper problems, financial experts generally say you should not panic.
Even if stocks continue to fall in the coming days, market corrections are normal, said Greg McBride, the chief financial analyst at Bankrate.com, on Monday.
The USA and other major economies are growing healthy at this time.
“I warn investors to really be patient here and look for opportunities and not panic,” said Ross Gerber, executive director of Gerber Kawasaki Wealth and Investment Management, at CNN. “It really is not a time to worry about the long-term prospects of the market.”
What does this have to do with Trump?
The fall of the stock market is uncomfortable for the president of the USA.
“It’s a risky game to talk about markets, but it looks like Trump is going to live or die in the stock market,” said Greg Valliere, chief global strategist at Horizon Investments.
The White House said in a statement that Trump focused on “our long-term economic fundamentals, which remain exceptionally strong.” The statement mentions the strengthening of economic growth, low unemployment and increased wages for workers.
But some of Trump’s policies are also incorporated into concerns that weigh on actions at this time.
The recent huge tax cuts for companies were initially hailed by investors. But they also prescribed expensive drugs for a healthy American economy.
Stimulating a strong economy could be too good. Morgan Stanley warned in the fall that “overheating” the economy can be counterproductive by making stocks “increase and then burst.” And the current tensions in the bond market reflect the concern that the US Treasury. UU Need to take on more debt to pay for tax cuts.