A MAJOR market meltdown hit investors on Monday, with the Dow Jones Industrial Average plummeting 1,000 points before showing a slight recovery.
This drastic drop, which affected several US retailers, resulted from fears surrounding the weakening of the economy and raised doubts about another recession.
4
The turbulence began on August 2, when labor market data for July revealed a disappointing increase of just 114 thousand jobs, falling short of the 175 thousand predicted.
Compounding the issue were less than encouraging earnings reports from tech giants Amazon and Intel, erasing the optimism that had built up following the Federal Reserve’s suggestion of a potential interest rate cut in September, according to the report. Bureau of Labor Statistics.
Since then, critics have pointed the finger at the Federal Reserve, arguing that it had missed an opportunity to promptly lower interest rates.
This inaction has raised concerns about the possibility of pushing the US economy into a recession while keeping rates at the highest levels in the last two years.
read more about the collapse
Notably, Warren Buffett’s recent decision to sell about half of his Berkshire Hathaway holdings in Apple has sparked more speculation among investors about the underlying health of the market.
The backdrop to this sell-off was the Bank of Japan’s decision to raise interest rates by 25 basis points, reversing two decades of ultra-low rates.
This shift, coupled with the unfolding of the “carry trade,” where large investors borrowed money cheaply in Japan to invest in U.S. stocks, led to widespread market volatility.
“This morning, market volatility reached its highest level since the start of the Covid-19 pandemic,” said Gregory Daco, chief economist at EY, by US News.
“However, the market panic appears disproportionate.”
OUT OF SYNC
In an exclusive interview with The US Sun, Rob Burnette, investment advisor representative and professional tax preparer at Outlook Financial Center in Troy, Ohiopointed to the influence of the media in increasing nervousness around inflation, employment and interest rates.
“The latest jobs report was not in sync with analyst expectations, so there was a lot of program trading on the sell side of the market,” he explained.
“The reaction snowballed and created, in my opinion, a significant overreaction to events.”
Burnette believes that referring to these events as a “crash” may be an exaggeration.
“I think we are seeing corrections, which are a natural part of the market,” he said.
The latest jobs report was not in sync with analyst expectations, so there was a lot of program trading on the sell side of the market.
Rob Burnette
He emphasized that some investors may have suffered losses without a clear understanding of when to re-enter the market.
“Corrections are a normal part of a healthy market,” Burnette said, later adding, “I don’t think the recent correction is significantly different from others. For me, it was just another day at the office.”
THERE ARE FIXES
Burnette predicts that average Americans may not face drastic consequences from recent volatility.
“The bull market we have been experiencing will have corrections along the way,” he noted.
He added that there is a possibility of a recession, but did not necessarily blame the recent drop.
“I believe we have been in and out of recession over the last two years. Employment reports and GDP rates are almost always revised downwards,” she explained.
He also highlighted that the most recent employment gains have been mostly in part-time jobs, which could leave many workers struggling to make ends meet.
“If we look at the data, the most recent employment reports show that the majority of jobs created were part-time, at the expense of full-time jobs.
“Employment gains mainly benefited the government and foreign workers. If this trend continues, then employees will have to take on two or three part-time jobs to make ends meet and could lose employer benefits like health care.”
I believe we have been in and out of recession over the last two years. Employment reports and GDP rates are almost always revised downwards
Rob Burnette
KEEP AN EYE
Burnette believes that the stock market and the economy are interconnected but distinct entities.
“Both will ebb and flow over time, but not at the same rate or level,” he explained.
He highlighted that one should think about the importance of solid investment risk management, living within one’s means and maintaining a long-term financial plan.
As the situation evolves, Burnette advises Americans to remain vigilant about their financial decisions.
“Be aware of the risk you take with investments and know in detail where your money is going”, he emphasized. “There will always be a level of uncertainty, so this is eternally good advice.”
The US Sun has extensive coverage on the recent market crash, including information on a little-known rule regarding stocks.
You can also learn more about the crash and what it affected.
4
4
This story originally appeared on The-sun.com read the full story
