Analysts Caution Investors
Media outlets reported that the constant trade disputes had left investors uncertain about the duration of the current economic boom. K.C. Matthews, a chief investment officer at UMB Bank, stated that he would exercise caution in matters relating to the identification of entry points of assets that were risk-based, and he also advised investors to maintain their risk-based assets but desist from making new investments into the market at this period.
Matthews added that the economy was proceeding from a Goldilocks economy characterised by low-interest rates, minimal inflations expectations and steady corporate earnings to an economy characterised by the opposites. Speaking to a news agency, an investor also expressed that it wasn’t currently the best time for a new investor to enter the market.
Sources claimed that even in the presence of positive occurrences such as the growth of the economy, the low unemployment rate of 3.8%, the forecast of a GDP growth of 4.6% in the second half of 2018 and the earnings which were reportedly better than anticipated, investors have remained uncertain about the lasting effects of these positive changes.
Causes of Market Volatility
Media outlets reported that market volatility became a common occurrence since President Trump announced the steel and aluminum tariffs in March. Reports also attributed the cause of the volatility to bigger caps that had been outperformed by smaller caps and the concentration of returns obtained from FANG stocks in Nasdaq.
Sources also claimed that the coming midterm congressional elections added some form of tension and the federal funds’ interest rate hikes have also played a part in increasing the market volatility. However, Mathews expressed a belief that an agreement on trade terms would soon be reached.
According to Matthews, those who were cooler would hold discussions on the trade issues and would reach a point where a level-off would occur and an agreement on trade which wouldn’t repress economic growth would be made. He added that the agreement would not affect the basics of the economy and there would be decency in economic growth and corporate earnings.
Market Volatility
Sources claimed that last week Thursday marked the eight days of the Dow Jones Industrial Average‘s losses, but there was reportedly a positive change intraday on Friday. Reports indicated that stocks closed higher the next day as investors tried to slightly ignore the trade tensions between the US and China and that occasioned a substantial rise in energy shares. Reports further indicated that the close on Friday marked the first gain for the 30-stock index in 9 sessions and marked an end to its longest series of losses which started in March 2017.
Reports indicated that the Dow Jones Industrial Average rose to 24,580.89 with about 119.9 points from its initial rate and Chevron and Exxon Mobil were labelled among the best-performing stocks in the index. The S&P 500 also gained 0.2% and closed at 2,754.88, and it had energy, telecommunications, and materials doing well. The Nasdaq composite also closed at 0.3% lesser at 7,692.82 as tech shares fell.
Media outlets reported that global markets had also been experiencing instability since the tensions surrounding the tit-for-tat trade dispute between the U.S. and China continued to escalate. Reports also indicated that the major indexes closed lower for the week, including the Asian equity markets and European stocks.
While examining the impact of the trade dispute, JJ Kinahan, chief market strategist at Ameritrade stated that as bad as things seemed to people, the recent happenings had links to resources reallocation. He said that he believed investors were clever for exercising caution and re-evaluating stocks like the Russell 2000 and Nasdaq that both reached an all-time high last week, because those stocks could be affected if the tariffs fall through. Kinahan also stated that the market conditions were still pretty good.
Alex Chalekian, the CEO of Lake Avenue Financial also said that most of the discussions on tariffs and trades had been priced-in. He, however, stated that depending on the outcome, the effect might not be the best for the economy generally.
Reports indicated that the shares of companies that carry out quite a lot of business activities outside the US such as Boeing, General Motors, and Caterpillar all rose by at least 3%. Also, sources claimed that the Energy stocks of Chevron and Exxon Mobil rose with over 2%, while the Energy Select Sector SPDR Fund (XLE) also increased with 2%.
