The local stock market is also painted red in the lead of dual stocks at this time, after the negative lock on Wall Street on Friday – which marked a week of declines, in which the Nasdaq lost 7.6%, the S&P 500 by 5.7% and the Dow Jones 1.3%. The main of
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Alex Zabrzynski writes in a review that he publishes this morning that the declines this time are positively different from similar situations in the past and that “according to market performance, it seems that we are in a relatively limited event and not in a large-scale economic-financial crisis.”
So where are these things relevant? Less to Europe, more to the United States, and there too – especially to the technology sector, and in a way that does not signal an overall decline in demand in the American economy. The Nasdaq entered correction territory this week, and the lock last Friday set it at 14% lower than its peak in November. A correction is defined as a decrease of at least 10% from a record level.
“A decline in this rate was similar to the average of all episodes of declines over the past decade, but it had a number of unique characteristics that may teach about its possible consequences,” notes Zabrzynski, who has examined episodes of corrections in the Nasdaq 100 since 2010. The corona, which he said was an unusual event).
“In most episodes in the past, declines in NASDAQ have led to declines in government bond yields. However, since the outbreak, in all cases of declines in technology stocks, including the latter, yields have actually risen. Rising yields indicate the event is unlikely to turn into a macroeconomic crisis.”
Rising yields reflect market expectations of the Fed raising interest rates, and as they rise the purchase price of US government bonds falls – that is, they have less demand, hence there is less “panic” towards safe assets, and therefore Zevzynski does not see a crisis on the horizon. Macro as he writes – and unlike before.
This, then, is the situation with US government bonds, which are an indicator – but we need to look at the rest of the world as well. Thus, outside the United States, Zabrzynski points out that stock performance since the beginning of the year, especially in emerging markets, where stocks have risen, “has been much better than in previous episodes of declines in U.S. equities. Than the global. ”
And if to stay in Wall Street, “relative to the declines in the Nasdaq, the declines in the S&P 500 were small compared to previous episodes,” the author reminds us, “which illustrates that the main problem is in the technology stock sector and not in all industries. “Most of the sectors in the S&P 500 have achieved a higher return than the general index.”
In the corporate channel in the bond market, when looking at the leaf that is traded at high yields, ie the more risky assets, Zabzhinsky finds that the opening of the spreads (the gap with government bonds) “has been relatively minor so far – and this is an indication of a policy event Super-expanding monetary policy and not economic damage to all companies in the economy. ”
And perhaps to connect more with the real economy, Zabrzynski also reviews the picture in commodity prices. “In contrast to the declines that usually occurred during periods of declines in stocks, commodity prices in general have risen. A rise in commodity prices reflects that investors do not estimate that declines in stocks herald significant significant damage to demand.”
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