Beyond the market, the Sahm Rule indicator triggered which was designed to indicate the start of a recession. It happens when unemployment rises 0.5%. It's an indication they should cut rates which they probably will. Or not - it's debatable https://www.cnbc.com/2024/08/07/sahm-rule-creator-doesnt-thi...
>[the rule] has never failed to indicate a recession in cases stretching back to 1953
What happened was an unwinding of Japanese yen interest rate arbitraging. The party of one of the last remaining sources of cheap cash went away, and a bunch of fragile investment theses collapsed in other markets around the globe.
I think MAANG has much more value to lose and are probably headed for more rounds of layoffs. NVDA and SMCI are still way overvalued.
"Economists at Goldman Sachs over the weekend said they saw a 25 percent chance of a recession over the next year, up from 15 percent before the latest round of economic data."
Fears of recession are all over the place, and mainstream will play down the issue so as not to blame Democrats before the elections.
Because of course the same newspaper that spent years overtly peddling the Bush fiasco about WMD on the government's behalf, then later belittling people who argued for a lab leak theory, while also screeching about the supposed Russia connection to Trump after completely failing to take seriously a possible electoral victory for him and becoming hysterical about misinformation being everywhere for that very reason, (and for many things regarding COVID that were later taken seriously as government blunders became known) has indeed been an impartial, competent source of good reporting over the last 20 years.
this will be good for tech if it continues... short term pain, sure... but if sell off continues it will pressure fed to loosen rates and turn money spigot back on for startup and investment capital. the recent appreciation in tech stocks has primarily benefited existing shareholders and AI has driven more capex expense expansion that opex
The shrill response to this minor correction makes me wonder... are people reacting this way because social media has broken our brains and we have to freak out about everything for the likes? Or is this due to roughly half of the population actively wishing for the economy to crash so Trump will have another talking point?
It's an election year, so this is expected. Half the country is actively rooting for the USA to fail so their candidate of choice has more talking points.
Is it just a “minor” correction and what does that even mean? The market closed around 6% down from what it was just 5 days ago, and 8% down from a few weeks ago. Volatility was incredibly high yesterday, even higher than the last big peak, which was at the start of the pandemic. There has been low predictability in how the fed will act and lots of debate about whether they are too late on acting. This has nothing to do with Japan, and everything to do with the US jobs report, which is literally what triggered the sell off. I am not sure why this blog post is trying to create a link to Japan.
Let’s also not forget, that the economy’s growth depends significantly on a few mega corps, which is not healthy. And those companies are likely overvalued. Berkshire Hathaway dumped Apple shares, Amazon lowered its guidance, and Nvidia - and AI as a whole - is now clearly known to be overhyped. If you remove these companies, what do you have? A stagnant economy with inflation that isn’t under control, reduced employment, and ballooning public debt. Clearly this isn’t a good situation, but America is lucky to have a strong currency and low exposure to global unrest.
I think your latter point that half the population wants the economy to crash for political gain is potentially true but it is equally true that the other half wants to pretend the country is doing well in every single way so Harris will have another talking point. So I am not sure why it is relevant.
The standard definition of a correction is a 10-20% market decline. “Minor” corrections aren’t defined, though one could imagine an event that barely meets the threshold making sense.
But yes, strictly you are right - this isn’t a correction at all.
> the Nasdaq Composite confirmed it was in correction territory after a soft jobs report stoked fears of an oncoming recession
My point was that it was explicitly a correction and officially confirmed as such for some indices, and that the label of “minor” is more of an opinion or spin.
The US jobs report was 4 days ago and the market dropped a little bit. The Bank of Japan interest rate changed yesterday and the market dropped a lot. The article pointed out that the Japanese market almost crashed.
The carry trade was borrowing zero interest rate yen, then investing it in US stocks and other places. When Japan raised interest rates, investors sold their stocks, etc to cover. The other assets of carry trade also dropped at same time so not just US stocks.
The market may be weak, but the drop was from Japan.
The S&P dropped 2% on Thursday and 1.9% on Friday and 2.9% on Monday. Initial jobless claims report was Thursday, and the employment report plus unemployment data was Friday. Monday was a continuation of fears around the US economy because the US trading day started with Chicago’s fed reserve president saying that the jobs report was bad but that they are not going to react, at a time when many were calling for them to take emergency action. I agree that there are other factors like unwinding carry trades and global conflicts, but most news articles seem to say Monday’s drop was due to fears of a US recession.
The S&P 500 dropped 5% overnight between Friday and Monday, starting on Sunday night when Japan made their announcement. It went up on Monday from the bottom which is why the daily percentage is smaller. It has bounced most of the way back. Which is what you would expect from flash crash.
To some extent it always happens; some talking heads have predicted all 20 of the last two recessions. It does seem slightly more OTT recently, though. Possibly part of it is just that people have been expecting a big global recession for so long now; really ever since late 2021 a lot of people have been claiming there'll be one any minute now. At this point it's so much in peoples' heads that any wobble looks like the end.
This blog post is about the stock market, not the economy. It does not mention inflation, stagflation, rising energy prices, rising unemployment, current wars, likely additional wars, etc.
All by the way the product one of the worst administrations that the U.S. has ever had. Now that the layoffs also concern software developers, some people here might understand.
The huge amount of stimulus money is slowly unwinding, also people panic. Let’s say I’m invested with $50,000 in Walmart and I’m up 8.9% . In ordinary times I’d stay invested to see maybe 15%-20%
When I see in the media the market is dropping and my 8.9 is already down to 7.9 I’m selling to keep what I can.
This is how the panic happens
But now I’m sitting on this cash, and like Matthew McConaughey says in wolf of Wall Street , they’re fucking addicted , so the next day I put some or all back into a new idea a new brainwave.. out of tech and into food production. Out of Walmart and into real estate.. who knows
But slowly the stimulus will unwind in equities, bonds, real estate …
> But now I’m sitting on this cash, and like Matthew McConaughey says in wolf of Wall Street , they’re fucking addicted
Only point of contention is that when you have a currency experiencing sustained inflation over any medium/long term time horizon, it makes sense people would want to hold anything over than cash. Anyone who saved in cash (even using Term Deposits) from basically the 70s to today in any currency has had their purchasing power destroyed.
Too easy?