The price of the US stock index Dow Jones has fallen by more than 3000$ in recent days, making this the largest drop since the financial crisis 10 years ago. The instability began on Friday, February 2, after the Department of Labor published data on the United States labor market (Non-Farm Payroll):
New jobs created: 227000 versus 175000 forecast!
Wages also rose over the last 12 months by 2.9%, the fastest pace of growth since June 2009!
As wages rise, people's spending also increases, which pushes consumer prices higher, so the Central Bank will have to take action to keep inflation growth under control. That is why investors are worried that the Federal Reserve (FED) will have to raise interest rates several times this year. Until now, investors had expected the FED to raise interest rates only twice this year.
Jerome Powell, the new FED chairman, commented on the situation, assuring that the American financial system is “stronger and more resilient” than before the global financial crisis.
Donald Trump also commented on the situation, saying that they are focused on “long-term economic fundamentals”.
Another reason for the decline in indices/stocks may be:
Because some banks, such as JP Morgan, Bank of America and Lloyds Bank, prohibit the purchase of cryptocurrencies with credit cards, investors are forced to review their investment portfolios, partially withdrawing from indices and stocks so they do not miss the opportunity to invest in cryptocurrencies at the low prices we have at the moment.
The collapse reduced the fortunes of the world's 500 richest people:
Warren Buffet – the third richest person in the world, was hit the hardest, losing 5.1 billion dollars, according to the Bloomberg Billionaires Index.
Mark Zuckerberg recorded a loss of 3.6 billion dollars.
Jeff Bezos, the richest person in the world, was affected by what happened on Wall Street, with his fortune falling by 3.3 billion dollars as shares of his company Amazon dropped by 2.8%.
Larry Page and Sergey Brin lost 2.3 billion dollars each, while shares of their company () depreciated from around 1175$ to 1050$, a drop of 10%.
Even so, at the moment the indices have regained their lost positions. Here are the charts for DOW and S&P500:
Conclusion:
Analysts believe that this is not the beginning of a new global economic crisis, but only a normal correction in a market that has grown quite a lot since 2016 and, in the view of many analysts, offers investors the opportunity to buy stocks at attractive prices.
Risk warning: This article is for information and education only, reflects the situation as of its publication date and does not constitute investment advice, an offer or a recommendation to buy or sell any financial instrument. Trading leveraged instruments (Forex, CFDs) and crypto-assets carries a high risk of losing your capital. Past performance does not guarantee future results. Before investing, assess your objectives and risk tolerance and, if needed, consult a licensed adviser. Details: Disclaimer & Risk Warning.
Translated from the Romanian original with AI assistance.
