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Politicians and media have been warning about the stock market drop since the last few weeks. The upward movement in gold and Bitcoin is assumed to signify the same, while, there are other reasons for upward trends in safe havens like Fed interest rate change, the G20 meet and the trade clash between US-China. Some analysts assume, in the worst case, the index may drop by almost 50 per cent from the previous highs and some believe the crash may have a long-term impact. There are many possibilities where investors and analysts are formulating extreme predictions as they want the investors to be prepared for such movements in stock markets and carefully invest during the time.
Barclay said there are three factors which could hit the market – the trade terms, Federal Reserve rate cuts and economic slowdown. The markets may ease and not convert into a full recession, which can create a momentum shift for the investors or symbolize a late-stage bull market. Amidst such predictions, the markets have been gaining new highs where the S&P 500 was at one of its best since last year.
There are signs that the Fed may remain aggressive in its plans to cut-rate, irrespective of market changes and trade issues, and there are hopes of truce between - Trump and Xi Jinping. The truce may be initiated as the US elections are near and the markets need support to sustain. Globally investors are waiting for the G20 meet where the US is willing to withdraw the additional $300 billion Chinese duties. The G20 may not provide the platform to ultimately reinstall the previous trade deals but it may encourage discussions on the issue.
China faced a decline in early trade where Shanghai slipped 0.43 per cent in June last week. The 10-year US Treasuries declined 120 basis points since November.
The speed at which dollar is falling is also creating tensions as it stands at a 3-month low of 95.980.
Gold surged to 6-year highs in the last week reinstalling the safe haven facet where it reached $1420 an ounce. Gold has been gaining and now is at 12 per cent up since May to $1,426.39 an ounce and oil consolidated as the tensions between Iran and US erupted over the drone strike. Brent futures were up 8 cents to $64.94.
Asian stocks remained at a low on Wednesday over the Wall Street sell-off and market almost cooled over the lowering Fed rates. China’s listed bank shares were down over the concerns related to small farm loans. The yen continued to trade at 107.01 against the dollar, as it touched the lowest 107.50 in the last week of June, even though, it continues to be a safe haven currency option.
Since the investors are expecting some changes, they are encouraged to rebalance the portfolio to suit to the new changes and sell some of the asset class, although, the key to such volatility is holding investment for a long-term as there are a lot of greens available, moreover even the analysts cannot predict the exact low point at the time of crash.
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