Insights

The biggest stock shocks this year so far

09 May 2018  |  NEWS

We’ve just completed the first quarter of 2018, and it seems like a good time to take stock of share performances. Australians are starting to show an increasing interest in investing overseas, so it’s crucial to keep an eye on those markets. They may seem far away but with portfolios diversifying every day – and rightly so – those offshore financial shake-ups can be felt right here in our Australian pockets. Here are some of the surprises we’ve encountered so far.

February

Many news sources were quick to describe what happened to the Dow Jones as a crash – because it makes better headlines. In reality, February 5th saw the Dow Jones lose 1,175 points, with intraday figures showing the loss was nearly 1,600 at certain points in the day. That hadn’t happened in more than six years.

The DJIA (Dow Jones Industrial Average) gauges the performance of 30 major companies including Coca-Cola, Microsoft, General Electric, and Exxon. This makes DJIA one of the most keenly followed indexes in the financial world. Statistically, this 1,500 point drop was worrying, but it was around 5% of holdings and doesn’t constitute a crash.

For reference, the market crash that launched the Great Depression in 1929 was triggered by a consecutive two-day drop of 13% on day one and 12% on day two. Market crashes are generally defined by drops of 20% or more. The DJIA fall in February was more of a market correction. Also, from January 29th to February 7th, MSCI lost 7.5%, and FTSE 100 dropped 8.2%.

March

From about mid-month, there were a few shake-ups. The Dow dropped 5.66%, NASDAQ went down 6.54%, and S&P 500 experienced a 5.95% decline. These are three major American exchanges, and the cumulative result was a 2-year low in terms of weekly stock performance. Trading in other markets wasn’t much better, with the MSCI EAFE losing 2.64%. While stock performance isn’t an exact science, this dip is largely assumed to be caused by Trump. Prior to these falls, he imposed tariffs on aluminium and steel imports.

Then, early in March, China was accused of appropriating American Intellectual property. In response, Trump ‘punished’ them by approving a new set of tariffs against Chinese imports, tariffs that could cost the Asian nation upwards of $60 billion. China said it would ‘review its options’ which included a retaliatory campaign against well over 100 American products, as well as possibly engaging the WTO and boycotting US T-Bills. The market ripple is a highly probable cause of that week’s trading decline.

Now that Easter is gone and Labour Day is behind us (globally, since in the US Labour Day isn’t until September), it will be interesting to see how the markets will adjust. And this – more than anything else – emphasises the importance of having an internationally diversified portfolio, because, in this instance, the troubles in the US market could potentially be counterbalanced by the Asian response to China’s plan on the US import tariffs.


To learn more about global trade or to  open your own trading account, visit our website, fill out the form, and we’ll get right back to you.



Read Also:

Spotify and Dropbox – The Next Unicorns to Go Public

5 Tips to Become a Successful International Equities Shares Trader

Risk Disclaimer: The information above is of general nature only and does not take into account your objectives, financial situation or investment needs. Prior to you make an investment decision, please make sure you carefully read and fully understand our Financial Services Guide, Terms and Conditions, Privacy Policy and other relevant documents that you can obtain from this website. Monex Securities Australia Pty Ltd (AFSL No. 363972; ABN 84 142 210 179) is the Financial services provider. Financial products trading carries risks and may not be suitable for all investors. You are strongly recommended to seek independent financial advice before making any investment decisions.

,

Related Articles

The food delivery company taking on China's BAT stocksInvestors who trade international shares are likely to be familiar with the Chinese giant companies Baidu, Alibaba and Tencent - known as the BAT ..

“Sell in May and go away.” Will the old adage work this year?The S&P 500 fell 6.6 percent in May as geopolitical fears and weak earnings hammered sentiment. It was the first losing month of 20..

Register For Demo Account

Find out how easy it is to invest in international markets and diversify your portfolio.

Zero Brokerage Offer