Dear PGM Capital Blog readers,
Stocks fell sharply on Wednesday, October 10 and Thursday October 11, in a second straight scary day on Wall Street as investors dumped equities around the globe because of fears of rapidly rising interest rates, a possible global economic slowdown and overly ambitious tech valuations.
WEDNESDAY, OCTOBER 10, 2018:
On Wednesday, October 10, U.S. stocks dropped sharply as a massive selloff in the biggest tech stocks drove markets to lows not seen since February of this year.
The Dow plunged 831 points, losing 3.15 percent of its value. It was the second-biggest drop of the year for the Dow, which on February 5 lost over 1,100 points in a single trading session.
Below YTD chart shows the drops of the DOW in February and October of this year.
The S&P 500 lost 3.3 percent, while the tech-heavy Nasdaq composite fell just over 4 percent, its biggest loss in more than two years.
THURSDAY, OCTOBER 11 2018:
Wall Street had another rough day on Thursday, October 11, with the tech-heavy Nasdaq index dipping approx. 10 percent, for it come into correction territory as can be seen from below 5-day chart and the Dow Jones closing 548 points down after another day of market convulsions.
As investors fled the stock market for bonds and other safer assets, gold surged by 3 percent to hit its highest level since early August as can be seen from below chart.
PGM CAPITAL’s COMMENTS & ANALYSIS:
Stock prices have been hurt lately by fast-rising interest rates. On Wednesday, the 10-year yield once again touched its highest level in more than seven years as can be seen from below chart.
Interest rates began spurting higher after several encouraging reports on the USA economy. Higher rates can slow economic growth, erode corporate profits and make investors less willing to pay high prices for stocks.
Higher interest rates mean greater expense for local and state governments and corporations, something that hammers profits. Rather than keeping their money in companies that are facing shrinking margins.
Tech stocks, which have been among the biggest winners in the current bull markets, suffered the steepest losses Wednesday. Apple and Amazon both had their worst day in two and a half years.
This year, thus far, doesn’t look like it’s going to be a barn-burner. Year-to-date, the dow is up a meager 3.55%, the S&P 500 is up 4.19%, and the Nasdaq up 7.5%. Historically, October tends to be the stock market’s cruelest month, so there’s no telling how the markets will perform for the rest of the year.
Below chart gives shows the rout of the DOW Jones, in the week of October 8.
Last but not least, before taking any investment decision, always take your investment horizon and risk tolerance into consideration.
Keep in mind that share prices don’t move in a straight line. A Past Performance Is Not Indicative Of Future Results and that markets can remain irrational longer than you can remain solvent.
Yours sincerely,
Eric Panneflek