Probably, the most skittish creature on the planet is the investor. Investors are easily scared and most have a herd mentality, but knowing this can give the canny investor an edge, picking up stocks which have cheapened beyond economic factors warrant.
The latest example of this truism has been seen across the USA and Asia in the past 24 hours. The gains seen over the year-to-date have been extinguished for the Dow Jones Industrial Average and the Nasdaq composite index in the current rout: the Dow lost 2.4% to stand at 24583 and the Nasdaq shed 4.4% to stand at 7108.4 points – they started the year at 25296 and 7136.6 respectively. The fall experienced by the Nasdaq was its worst one-day fall since 2011. It has shed 10% of its value since September and the last round of investor jitters.
Tech stocks such as Amazon, Facebook, Netflix and Alphabet (Google’s holding company) saw declines of 5.9, 5.4, 9.4 and 4.8% yesterday. The stocks had held up relatively well previously when investors reacted to concerns over the US trade wars.
When the dust settles, analysts expect that the Dow will have seen its largest monthly contraction since May 2010.
The decline in Asia saw 3% wiped off the Nikkei 225. However, in early European trading all of the major European stock markets were in the black.
The background to the wider decline stems from a basket of concerns including: the effects of Trump’s trade war; the (slight) downturn in the Chinese growth rate; weak new home sales in the US (slowest rate for 2 years), tensions with Saudi Arabia over the murder of Jamal Khashoggi in their embassy in Turkey; Brexit worries, Italian budget angst and perhaps the fact that the moon is full…