© REUTERS / Brendan McDermid a Trader on the new York stock exchange. 11 Oct 2018© REUTERS / Brendan McDermid
Before he could recover from the lows of the first half of the month, the US stock market suffered a new blow. Thursday, 25 October, the index went negative YTD. The antilinear was the Nasdaq led by Apple, Amazon, Google and Facebook, and collapsed to the lows of 2011. The current collapse is the second in a week — has caused a Domino effect, triggering a drop in the Asian markets.
Economists are wondering whether threatens a chain reaction of new crisis, and the largest investment Bank of US Goldman Sachs said the impact of falling wall street, the US economy will be felt early next year and they will be very significant. And JP Morgan experts believe: a true nightmare on the stock market has not yet started.
The reasons for the collapse
Last Thursday, the Dow Jones lost 2,41%, the S&P 500 to 3.09%, off almost its entire growth from the beginning of the year. The greatest losses in the Nasdaq, which includes stocks of the largest U.S. technology companies. He fell to 4.5% — a record drop since August 2011.
According to analysts, the fed is the main culprit of sales. «It seems that the fed are going to continue to raise rates, despite increasingly clear signs of weakening global growth,» said Alec young, managing Director for research global markets in the FTSE Russell.
The likelihood of interest rates increases inflation. According to scientists at Yale University in the inflation cycle, the U.S. now begins the period of growth, including due to escalating trade conflicts. This means that the fed will have to raise.
According to Steven roach, a senior researcher of the University and former head of Morgan Stanley Asia, next year inflation in the US will increase up to 3-3,5%.© AP Photo / Richard DrewРабота the new York stock exchange during the announcement of the decision of the U.S. Federal reserve to raise interest rates. 16, 2015© AP Photo / Richard DrewРабота the new York stock exchange during the announcement of the decision of the U.S. Federal reserve to raise interest rates. 16, 2015
The economic slowdown
Analysts of the American investment Bank JP Morgan Chase believe that a real collapse of the US stock market is still ahead and one of the reasons of the future — the abundance index, stock and other passively managed funds.
If during the global financial crisis of 2008 passive assets accounted for about 30% of the total actively managed assets, but that figure rose to 83%, ascertain the monetary strategy of the Bank.
Analysts at other major investment banks — Goldman Sachs calculated the impact of a series of collapses in the stock market on the us economy. They point to the fact that the wall street of the driving force is in danger of becoming a burden.
The Bank also believe that the fed before the end of 2019 will raise you five more times, and it is twice more than the market now expects.
According to calculations by Goldman Sachs, if the sale continues and stock prices in the fourth quarter will fall another 10%, the negative impact on the economy by the second quarter of 2019 will be about 0.75% of GDP.© REUTERS / Brendan McDermid/File PhotoВывеска one of the world’s largest investment banks-Goldman Sachs, USA © REUTERS / Brendan McDermid/File PhotoВывеска one of the world’s largest investment banks-Goldman Sachs, USA
Thus, the possibility of further sales experts estimate as high enough. The thing is, that active sale has made the markets more vulnerable to further collapse, significantly weakening the existing level of support.
«The market has started to live its own life, as you know, the sale generates further sales,» notes Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.
The crisis in the offing?
There is great risk that the projected falls in the us stock market will cause a chain reaction and a new global crisis? Asian markets are already falling, and analysts point out: such a scenario cannot be ruled out.© AP Photo / Mark LennihanШтаб Bank JP Morgan Chase in new York, USA© AP Photo / Mark LennihanШтаб Bank JP Morgan Chase in new York, USA
As calculated by JP Morgan Chase, the collapse should be expected in 2020. Analysts remind that during the global crisis of 2007-2008, stock S&P 500 index fell by 54% from peak values.
The upcoming collapse of the stock market expected is not as large as the value of assets in developing countries are now much lower than in 2008.
The decline in market liquidity along with the growth of passive investment undermines the ability of the market to prevent large drawdowns in case of increase in volatility, the authors of the report of the financial holding company.
The probability of a crisis in the second half of 2019 is estimated as quite low. In many respects its dynamics is determined by the speed of rising interest rates the fed.