The past three trading days have wreaked havoc on the nerves of investors across the globe. The major sellout that took place on Friday, February 2, 2018, rolling over to the following Monday, saw significant loss in market indices. What many feared was a market crash, was simply a market correction after a two-year period of appreciating of stock prices.
This phenomenon was not unexpected as analysts predicted that eventually, the market would have corrected itself.
Of course, other factors played a role in Tuesday’s panic, for example, the rising bonds yields which people assumed would lead to inflation and higher rates, and eventually erode companies’ profits.
Following the plunge of approximately 1500 points in the Dow Jones index, and the S&P 500 down by 0.9 percent, the market recovered the best they have since 2016 by the end of Tuesday.
The most affected industries such as technology, materials and consumer shares paced a 1.7 percent gain in the S&P 500 Index, while DowDuPont and Home Depot led a 567-point surge in the Dow Jones Industrial Average, the biggest gain in two years.
Notwithstanding the major losses from previous days, the market is starting to see and feel the efforts of investors to bring forth stability and return consumer confidence.
This last market correction does not indicate that investors should become complacent about markets’ volatility. We do believe that without solid economic growth, rising profits and a gradual pace of normalising policy by the central bank, this plunge is one we could experience again. Investors and traders must keep a keen eye on their holdings and the companies on which they have been bullish about for years.
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