Jeff Fawkes is a seasoned investment professional and a crypto analyst. He has a dual degree in Business Administration and Creative Writing and is passionate when it comes to how technology impacts our society.
Dow Jones shows no positive signs in the coming of a presumable crisis caused by the Middle East situation, the U.S.-China trade war and other factors.
Many market participants were talking about the grand crash possible in the Q1 2020. And now it looks like the disaster is slowly entering the room.
The stock market is crashing on Monday, opening with a 136 points drop. Apple and Microsoft were saving the situation at the end of the year, but the overall picture now is not so good. The trading issues between the U.S. and China, as well as the recent actions of President Donald Trump against Iran, seem to add uncertainty to both local and international markets.
The oil price is going up which means that it will be harder for the big business to operate during 2020. Nick Raich, the founder of the Earnings Scout, says that in the coming weeks and months the S&P 500 participants will increase their spendings.
Investors Pull Money Back to Gold and Bonds
The S&P 500’s index was up just 1.1 percent in 2019, this is horrific compared to the 2018’s 22.7% upwards trend. However, the Friday crash which continued on Monday, shows that investors want to flee away from the unstable assets to more stable such as gold, bonds and possibly – cryptocurrencies/stablecoins. The statistics show that the gold and bonds are indeed hitting the records in recent hours.
The head of New York’s Federal Reserve Bank, John Williams, said that they are planning the rates cut. This can be a short-term punch for the Dow index, but in general, it won’t save the tricky situation.
Dow Jones is very vulnerable due to the ongoing Middle East conflict. Not only Iran left the nuclear agreement, but the American President also ordered to kill one of Iran’s most valuable generals. Combined with the low corporate revenues in 2019, this can mean a lengthy crisis for the U.S. stock markets.
The World Needs Structural Changes
Jim Besaw from GenTrust, who is managing the 2.5 billion in assets, has said that the overall prediction of the analysts that the S&P 500 growth will reach 9 percent in 2020 is fantastic. It will become a 5-6% growth in the best-case scenario. He says that global growth is highly unlikely, with the things not changing for decades in Europe and around the world:
“Nothing has changed in Europe. Things turn around when there are structural reforms, or when capital gets even cheaper. None of that has changed.”
He also notes that wage growth is at the risk too. The stocks are going down because of the margin erosion fears. He points on the fact that the big capital was getting its profits for more than 10 years so far, winning over the labor. Jim thinks that “at some point, this has to stop”.