Stock Market Sell-Off Turns Ugly
This past week the Dow saw its largest two-day drop since 2008, plunging 531 points as the sell-off turned ugly. Today the chaos continues with the Dow plummeting over 1000 points at the open. A variety of factors are converging that may be signaling a return to market volatility.
Here’s my quick take on what’s happening:
- Slower economic growth in China. The world’s second biggest economy is slowing much faster than previously thought. I expect China’s slowdown to continue to shake up the markets, short term, as investors there watch for signs that things may begin to stabilize.
- Interest rate uncertainty.The Fed has indicated it will start to raise short-term interest rates later this year, based on continued economic growth. However, see Point #1 China’s economic slowdown has created uncertainty surrounding the Fed’s next move. As you well know, investors hate uncertainty.
- Lower oil prices.Oil prices dipped briefly below the $40 per barrel mark. While lower prices at the pump typically signal improving economic growth, slower growth in China as well as slower growth in developing nations may push oil even lower.
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