Global equity markets experienced volatility not seen since the beginning of February (2018). The most significant losses happened on Wednesday, October 12th with the S&P 500 decreasing 3.3%, the Dow Jones 3.1% and the NASDAQ 4.1%. Canadian markets were also affected with the TSX dropping 2.1% on that same day. There were several reasons that contributed to this volatility:
US Federal Reserve
The US Federal Reserve increased interest rates for the third time in 2018, with the rate increasing 0.75% in total for the year. It was also hinted that rates will continue to increase. Although this interest rate increase was expected, investors reacted negatively with the possibility of a faster increase than what was priced into the markets.
Large Technology Stocks in the US
Large technology stocks in the US have been significant drivers of the US equity market the past few years. With such large increases in valuations, this sector also saw the largest sell off during this market decline.
Global Tariff Disputes
Ongoing global tariff disputes can also lead to inflationary pressures and the possibility of higher interest rates to slow down inflation.
Reasons for Optimism
Despite the high level of volatility, there are still reasons to be optimistic. The unemployment rate in Canada and the US is still close to the multi-year lows. Consumer sentiment and spending remain very strong. This optimism points to this only being a temporary market pull-back.
If you are concerned about your investment portfolio, please contact our PlanWright Financial office and talk to one of our Credential Asset Management Inc. Mutual Funds Investment Specialists.
Mutual Funds are offered through Credential Asset Management Inc. The information contained in this article was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This article is provided as a general source of information and should not be considered personal investment advice or a solicitation to buy or sell any mutual funds.