The financial markets were already very fragile at the beginning of this year and this fragility has actually increased because there is a tendency among central banks to step back from asset purchases, letting interest rates gradually adjust on the upside. And so this liquidity that we have in the world has been diminishing. It is not shrinking, but it is growing at the diminishing rate.
Then came the announcement of the Trump administration. It is a really bad idea to pick on China and to launch not only a trade war but a confrontation with the US’ largest trading partner who also happens to be a large buyer of US assets, bonds, stocks and of course, properties.
This idea has disturbed the financial markets around the world and so they are adjusting on the downside. Now, I would not call that the crash. A crash happened in 1987 when the Dow Jones dropped 21% in just one day.
In the US, we have gone from a peak to the current level, down by 7%. This is nothing. This is after an increase of the S&P from 666 in 2009 to the current level of over 2900. This correction is really not very meaningful but yet it may become meaningful.
In the US, we have gone from a peak to the current level, down by 7%. This is nothing. This is after an increase of the S&P from 666 in 2009 to the current level of over 2900. This correction is really not very meaningful but yet it may become meaningful.
- Source, Economic Times
