If you are an investor, even if you are only starting, you may have heard about Dow Jones Industrial Average, which is a stock market index. Still named Dow, this Dow Jones Industrial Average is established on thirty large public trading companies on any given trading day. The word Dow Stock is regularly used by the media and the investors to mean the overview health of the whole stock market. This article is about the reason for the fall of Dow Jones Industrial Average.
The Dow Jones Industrial Average fell by seven hundred points as an aggressive market sell-off collapsed hope for a turn around on 4th December 2018. The day before had seen a moderate stock bounce back, and the investors were wondering on why the Dow Jones Industrial Average fell the day after. Some days before this happened the White House had declared a short-term truce between the United States (US) and China who are known to be trade rivals. Still, the American authority had quivered on, giving out concrete data outlining how China conceded at the G-20 summit when the truce was declared.
The US concurred to hold back their threat of doubling tariffs on Chinese products. Nonetheless, the statements from two delegates of the nations hinted that the negotiations ended with few agreements. What followed was confusion with the Trump administration and the White House economic advisor issuing out contrasting statements on when the hold on tariffs would begin. The disparities left investors to wonder if substantial success between the two nations can be arrived at in the foreseeable future. The investors have lost faith, and the marketers are getting worried regarding a recession that is hinting to be around the corner.
During the same day, the yields of the 10-year Treasury bonds fell to the lowest level in a period of ten years. It was not the first time the ten-year Treasury bonds yields fluctuated, but investors are concerned by the current drop since it resulted to the flattening out of the bond yield curve. This shows that there will be an increase in the two-year bonds yields and a decrease in the yield of the ten-year bond. In addition, it highlights that both inflation and rates of betting interests will drop for the following ten years. These are warnings of a recession because they define the default financial atmosphere in such cases.
In conclusion, typically, up to when the yield curve turns around will the stock market enter a phase of aggressive sale-off. This means that the two-year Treasury bond yields rise above those of ten-year bond.