Recession Fear Triggers Biggest US Market Fall This Year

Published / Last Updated on 14/08/2019

The Dow Jones Index in the US fell 800.49 points last night, around 3% to just 25,479, its largest fall in a year as fears of recession grow.

The falls were mainly in banking and manufacturing with Citigroup, the global US Bank falling 5.3% and Boeing (aircraft) falling 3.7%.

In addition, there was also a fall on government debt (US bonds), with investors still looking to the safety of investing in them as they offer modest, yet safe yields.

The difference between long-term and short-term bond yields is looked at as a sign that a recession is around the corner.  As yields are still low, investors are saying there are no safe haven alternatives to equities and still looking to US stocks if you need marginally higher returns based upon dividends.

As a result, the S&P 500 (smaller firms rather than the massive Dow Jones listed firms), still rose because dividends are around 2% pa rather than investors securing around just 1.6% pa yields on 10yr Treasury notes (US Bonds).

Comment

Markets tend to move higher just after a yield-curve inversion.  I.e. yields are falling but this is driving demand in equities as you cannot secure higher, despite them being low yields in general.  Ultimately, though this may mean 'the bubble is ready to burst'.

The directors of this website, Roberts-Clark, still clearly remember the stock market crash of 1987 caused by speculators on the bond market which then spilled over to the stock market casing 40%+ losses in just 2 days.  Be careful out there!

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