Stock markets are tumbling all over the world. Along the lines of my prediction in a recent post, stock markets in the US, Europe, Latin America & Asia, along with commodities markets, experienced significant declines.
Wall Street suffered the biggest fall in two years, brought about by massive “sell-offs” by investors, triggered by “great fear” of a US recession, while European markets also fell significantly, driven by the sell-off contagion and worsening debt problems in Europe’s large economies, including Spain & Italy. Latin American and Asian markets were not far behind either, as the sell-off continued on a global spree.
US equities fell to “correction” territory, defined as a 10%-or-greater drop from recent highs. If this persists, and I expect it will, then the US stock market could be pushed into “bear” territory, which is a more-than-20% drop from recent highs.
Oil prices also fell, as fears of a global economic slowdown hit the markets. Commodity prices, including gold & silver, fell as investors capitalized on profits from recent price increases, while others met margin calls on their stocks. However, one can expect gold, silver and also copper prices to go up in the near future as a safe-haven investment. Another safe-haven asset, US T-bill prices rose as their yields hit record lows.
After yesterday’s and today’s stock market plunges, tomorrow’s prospect doesn’t look too rosy either. The US Jobs Report for July, which is expected to be weak, will only heighten Wall Street jitters.
For now, the future looks bleak. But all is not lost. Regulators and governments will be forced to intervene, specially in the form of monetary easing. Also, investors that are in their “accumulation” stage of investing (read: young investors) would benefit from the low prices now. Plus, there are gains to be made from judicious commodities investment now.
So, investors, keep a cool head and let reason & analyses, not fear, guide your decisions.