Last week saw many stocks and indices take major hits as investors have been worrying that we are on the verge of a new global recession. Some of the hottest names of the year, such as Apple and Amazon, have suffered selloffs and even the international anchor of stability, the S&P 500, tumbled considerably.
Dennis de Jong, Managing Director of UFX, a stocks and CFDs broker, explains the situation: “What we saw towards market close on Friday goes in tune with the majority of global financial events. Remind you, the S&P 500’s large 5.8% drop and the DOW’s correction, is following the market-slowdown in China and Crude Oil’s continues slippage of recent months.
We’ve noticed that a large portion of those investors and traders that were selling-off and Closing Index based positions have re-routed their new liquidity towards more safe-haven assets such as Gold, and the less volatile EUR/USD currency pair.”
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Seemingly behind the fears pushing investors to gold and the plays on the global reserve currency is all the bad news coming out of China. A survey released on Friday showed that Chinese manufacturing has slowed the most since the financial crisis of 2009. Following the recent sharp yuan devaluation, and maybe even the horrors of the Taijin port explosion, analysts worry that the world’s second largest economy is about to crash, taking the world economy with it.
Other than China, the hardest hit markets will be those directly linked to it in investment portfolios, such as emerging markets, commodity exporters and Asian economies. European equity markets are also facing corrections and the U.S Fed is much less likely to hike rates as it was inclined to just a week ago. With evidently no safe market around the world, the question investors are left with now is where to turn.
“Looking beyond global market movement, there is a long list of reasons as to why some of the world’s largest indices plummeted in value last week, taking with it $139 billion in market value. Slow innovation, disappointing quarterly reports, and dropping market shares are just a few reasons as to why and what happened.
If you are not built for such heavy market fluctuations, we strongly suggest focusing on less volatile assets, such as Gold and major currency pairs,” says De Jong.