US stock indices experienced a significant fall during this week. In the red, the Wednesday Dow Index closed, down 3.15 percent. The S & P 500 lost even more, namely 3.29 percent.
The technology sector reported the biggest sale.
One of the reasons for the sale on the capital markets was the publication of the autumn look of the International Monetary Fund, which reduced the global economic growth estimate in the years 2018 and 2019 to 3.7 percent, thus disrupting investor confidence. Still in April, he expected an expansion of 3.9 percent.
In response to Hurricane Michael, which has caused the closure of 40 percent of the mining capacities of oil in the Gulf of Mexico, energy companies have also lost value.
Due to fears of China’s demand reduction as a result of the trade war with America, luxury accessories like Tiffany or Michael Kors were also down.
The rise in the European currency has partially hampered the distrust of the financial markets in the sustainability of Italian public finances, despite the promise of Giovanni Trio, the economics minister, that they will do their best to gain their confidence.
In the long run, this correction is completely healthy and natural, and can be even greater. With its monetary policy of raising interest rates, the Fed gradually reduces liquidity on the financial markets. By raising interest rates, the Fed aims at slowing down the economy with successive steps. This will also result in lower demand for loans, and therefore declining interest in investing. The trade war between the US, China and the EU only makes this situation worse and therefore correction is on the ground.On the other hand, analysts generally predict the slowdown of the economy in several major economies in the coming years.
This phenomenon has already occurred in some countries, but unlike America, the ECB still leaves interest rates at the minimum. This policy favors states such as Greece and Italy, whose debt is in very dangerous numbers. The migration crisis, low rates, but also the high indebtedness of PIIGS countries can cause an economic crisis. Another reason may be Turkish lire, respectively. its depreciation due to its strong connection to Spanish banks. It is difficult to predict whether the crisis has started or not, because it is very subjective. In my opinion, this is a healthy correction so far. Although there are many things in the market that can be the main trigger for the financial crisis, I do not think we are at that point. That would have to be something bigger.