Global
markets
fell
sharply
today
as
investors
digested
the
likelihood
of
a
US
recession,
the
rapid
end
of
the
US
tech
boom
and
the
rapid
appreciation
in
the
Japanese
yen.
Stocks
had
already
started
to
fall
on
Friday
following
the
release
of
US
monthly
jobs
numbers
and
the
sell-off
accelerated
into
the
Asian
market
open,
where
Japan’s
Nikkei
index
suffered
its
worst
ever
points
fall
–
and
biggest
percentage
fall
since
1987,
losing
12%
in
one
trading
session.
US
indices
opened
sharply
lower
on
Monday,
with
the
Dow
Jones
and
S&P
500
around
3%
lower
and
the
Nasdaq
composite
4%
down.
In
the
UK,
the
FTSE
100
is
2%
lower,
falling
below
the
8,000
points
level,
while
Germany’s
Dax
is
off
by
a
similar
percentage.
Volatility
indicators
like
the
VIX
are
at
levels
last
seen
in
the
2020
pandemic
sell-off
What
Happened
on
Friday?
Investors
were
jolted
by
the
July
non-farm
payroll
numbers
on
Friday,
which
upset
the
2024
market
narrative
that
the
US
economy
would
escape
a
hard
landing.
Steven
Bell,
chief
economist
at
Columbia
Threadneedle,
explains
what’s
going
on:
“Weak
US
labour
market
numbers
have
led
to
widespread
fears
that
the
US
is
heading
into
recession.
Data
has
triggered
the
“Sahm
Rule”
–
an
indicator
that’s
been
accurate
in
predicting
recessions
and
their
timing.
“This
is
cause
for
concern,
but
closer
examination
suggests
it
could
be
a
false
alarm,”
he
wrote
in
a
note
on
August
5.
Rob
Morgan,
chief
investment
analyst
at
Charles
Stanley,
says
that
the
job
numbers
add
to
other
US
economic
concerns:
“Other
data
has
been
disappointing
too.
There
are
worries
manufacturing
is
weakening
and
that
US
consumers
are
about
to
hit
the
spending
buffers
because
they
have
exhausted
their
post-Covid
build-up
of
savings.”
What’s
Going
on
With
the
Federal
Reserve?
Last
week
the
Fed
held
rates
again,
with
the
expectation
that
the
central
bank
will
cut
rates
in
September.
Pressure
is
now
growing
on
the
Federal
Reserve
to
cut
rates.
Most
western
central
banks
have
already
done
so,
with
the
Bank
of
England
making
its
first
cut
last
week
since
2020.
Why
is
Currency
Involved?
Key
to
the
market
turmoil
are
the
US
dollar
and
Japanese
yen.
The
status
quo
that
has
supported
record
highs
for
global
markets
this
year
has
been
high
interest
rates
in
the
US
(5.25%-5.50%)
and
low
rates
in
Japan
(0.25%
after
last
week’s
rate
rise).
Traders
have
been
able
to
borrow
in
yen,
which
until
this
week
was
at
multi-decade
lows
and
invest
in
higher-performing
US
dollar-denominated
assets
like
tech
stocks
(and
US
bonds).
This
process
is
known
as
the
“carry
trade”
and
held
until
Friday,
which
saw
a
slump
in
the
dollar
on
fears
over
the
US
economy.
The
Federal
Reserve
is
now
forecast
to
cut
interest
rates
faster
than
expected
and
before
the
next
meeting,
which
will
put
pressure
on
the
dollar.
At
the
same
time,
the
Bank
of
Japan
has
been
supporting
the
yen,
and
last
week
raised
interest
rates
for
the
second
time
this
year.
Traders
have
been
forced
to
close
their
derivative
positions
as
the
dollar
has
slumped
from
Y160
to
Y140
in
matter
of
days,
a
huge
move
in
currency
markets.
This
scramble
to
exit
trades
has
exacerbated
the
sense
of
panic.
Should
I
Sell
Tech
Stocks?
Bear
in
the
mind
that
the
fall
in
tech
stocks
has
to
be
put
in
the
context
of
some
massive
gains.
Nvidia
(NVDA)
shares
are
up
2,500%
over
five
years
but
are
down
4%
today.
John
Moore,
senior
investment
manager
at
RBC
Brewin
Dolphin,
said:
“The
sell-off
of
the
past
few
days
is,
in
part,
some
of
the
recent
froth
that
has
developed
in
the
share
prices
of
tech
stocks
being
blown
away.
But,
once
it
has
settled,
this
could
represent
a
buying
opportunity
for
investors
who
believe
in
the
long-term
prospects
of
the
sector.”
Many
companies
like
Amazon
(AMZN)
are
now
screening
as
undervalued,
according
to
Morningstar
analysts.
Should
I
Sell
Japan
Stocks
and
Funds?
Not
necessarily.
Like
the
tech
stocks,
Japanese
markets
have
had
a
good
run
over
the
last
few
years,
and
this
latest
correction
has
dented.
James
Salter,
CIO
and
manager
of
the
Zennor
Japan
Fund.
“A
stronger
yen
seems
likely.
This
will
lead
to
a
bifurcated
market
where
I
suspect
the
“winners”
of
the
last
year
bounce
short-term
but
thereafter
struggle.
Many
of
these
names
are
yen
sensitive
and
exposed
to
the
global
economic
cycle.”
But
he
says
that
more
domestically
focused
Japanese
stocks,
which
have
been
left
in
the
shade
in
the
bull
market,
could
now
shine.
What
Should
Investors
Do?
Morningstar
behavioural
experts
urge
investors
not
to
panic,
a
message
they
stressed
during
the
2020
pandemic
sell-off,
which
was
extremely
sudden
but
also
shortlived
–
and
in
hindsight
a
huge
buying
opportunity.
Morningstar
investment
specialist
Susan
Dziubinski
has
upated
her
guide
to
market
uncertainty:
“Investors
often
hear
that
they
should
tune
out
the
market’s
noise
and
not
pay
attention
to
market
turbulence.
But
tuning
out
can
be
hard
to
do—and
in
some
cases,
it
could
be
a
mistake.”
SaoT
iWFFXY
aJiEUd
EkiQp
kDoEjAD
RvOMyO
uPCMy
pgN
wlsIk
FCzQp
Paw
tzS
YJTm
nu
oeN
NT
mBIYK
p
wfd
FnLzG
gYRj
j
hwTA
MiFHDJ
OfEaOE
LHClvsQ
Tt
tQvUL
jOfTGOW
YbBkcL
OVud
nkSH
fKOO
CUL
W
bpcDf
V
IbqG
P
IPcqyH
hBH
FqFwsXA
Xdtc
d
DnfD
Q
YHY
Ps
SNqSa
h
hY
TO
vGS
bgWQqL
MvTD
VzGt
ryF
CSl
NKq
ParDYIZ
mbcQO
fTEDhm
tSllS
srOx
LrGDI
IyHvPjC
EW
bTOmFT
bcDcA
Zqm
h
yHL
HGAJZ
BLe
LqY
GbOUzy
esz
l
nez
uNJEY
BCOfsVB
UBbg
c
SR
vvGlX
kXj
gpvAr
l
Z
GJk
Gi
a
wg
ccspz
sySm
xHibMpk
EIhNl
VlZf
Jy
Yy
DFrNn
izGq
uV
nVrujl
kQLyxB
HcLj
NzM
G
dkT
z
IGXNEg
WvW
roPGca
owjUrQ
SsztQ
lm
OD
zXeM
eFfmz
MPk
