Is this the long awaited stock market crash?
IInvestors are always trying to anticipate the next stock market crash. Those looking for signs of the next major market downturn have obtained evidence to support the idea that it could come sooner rather than later, with investors continuing to worry about the sharp rise in COVID-19 cases in the United States and other parts of the world. world. At 11:15 a.m. EDT, Dow Jones Industrial Average (DJINDICES: ^ DJI) was down 767 points to 33,921. S&P 500 (SNPINDEX: ^ GSPC) had lost 65 points to 4,262, and the Nasdaq Composite (NASDAQINDEX: ^ IXIC) was down 143 points to 14,284.
You can always justify downward as to why the stock market should stop rising, at least in the short term. However, investors are spending too much time trying to figure out the exact timing. If you are truly worried about your exposure to the stock market, then now is the time to act. before the worst of the next bear market is happening. Below, we’ll take a closer look at what’s hitting the market today and what response might be the most appropriate.
Image source: Getty Images.
Many investors could not understand the huge gains that the stock market has produced over the past 15 months. Even as the global economy struggled under the weight of lockdowns caused by the pandemic, the stock market reflected a level of optimism that just didn’t seem to be there yet. Eventually, the vaccines led to reopenings, which in turn began to improve the outlook for businesses hit hard by the pandemic.
Today, however, investors fear that the markets have taken the lead. As the delta variant helps fuel the rising number of COVID-19 cases, the idea that the pandemic would soon no longer be a major factor in the economy is starting to lose credibility.
This change in attitude has dramatic impacts on financial markets:
- Bond yields have plunged as investors seek out the reliable, albeit tiny, returns offered by fixed income securities. Ten-year Treasury yields fell below 1.2% on Monday morning, and after seeing some upward movement in recent months, international bond yields now appear likely to remain negative in many countries of the world. Europe for the foreseeable future.
- The fall in long rates has hit financial stocks hard, with Goldman Sachs (NYSE: GS) the main large banks down with a drop of almost 4%. Financials play a major role in pulling the Dow Jones down by a larger percentage than other markets on Monday.
- Signs of inflationary pressure show early signs of reversal potential. Crude oil fell nearly $ 5 a barrel on Monday, falling to $ 67 a barrel and causing oil-related inventories to drop. Chevron (NYSE: CVX) was among the weakest in the Dow Jones, falling more than 3% Monday morning.
- Meanwhile, some stocks take advantage. Moderna (NASDAQ: mRNA) stocks rose, perhaps in anticipation of more vaccine sales, while Interactive Platoon (NASDAQ: PTON) has also gained traction as some predict that more fitness enthusiasts could stay home if levels of health risk rise.
Meanwhile, cyclical stocks in areas such as industrials and materials are also particularly weak. The declines come after a generally strong performance over the past year.
Don’t panic, but be ready for the next step
Dealing with market lows is always difficult, and in particular, the long-term rise in the Dow Jones makes the lows appear worse than they actually are. Declines of 2% have always been commonplace on Wall Street, but with the Dow Jones having jumped this far, the inevitable “Dow Down 700+” headlines seem ever more worrisome.
Panic selling after a stock market crash almost never works well, and that’s why feel comfortable with your current level of risk. before an accident comes is so important. In particular, if you find that your portfolio has invested a lot more in stocks than you thought after the big gains of last year, it is not unreasonable to rebalance your portfolio and take some of that money out of the market. before a crash. Many investors like to target certain percentages in various asset classes, and it’s a good idea to periodically check your holdings to make sure that gains in one area and losses in another haven’t upended your portfolio.
Monday morning’s downward movement does not count as a crash. That doesn’t mean there won’t be later today, tomorrow, next week or later this year. Regardless, however, have an investment strategy who recognizes the inevitable fact that an accident will happen at some point will certainly help you whenever that fateful day finally arrives.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.