The first quarter of 2018 has been wild ride for the stock market.
CGTN’s John Terrett reports.
The broad market the S&P 500 surged in January to all time highs along with the Dow and the Nasdaq before slumping into correction territory in early February before recovering again and finally ending the first quarter in the red, down 1.2 percent.
It’s the first time in 10 quarters that either the S&P 500 or the Dow Jones Industrial Average have posted a loss over a three month period.
Things weren’t much better at the tech heavy Nasdaq. Though there’s a gain of 2.3 percent, that’s the weakest quarter since the 4th quarter of 2016.
So what’s going on? The answer is a massive change of tone.
In 2017, the markets just went up and up as enthusiasm for the Trump Presidency with very strong corporate earnings and enthusiasm for the tax reform bill that passed in December, and I think some central bank dabbling in stocks also helped keeping the momentum positive.
Now, the threat of tariffs on steel, aluminum and multiple other goods means investors are worried about a trade war, particularly with China. As you know that story is ongoing.
Tariff is another word for tax. Tax hikes are inflationary, and the market fears interest rate hikes, because that makes investing in stocks less attractive as traders switch attention to bonds.
There’s concern all this may dim consumer sentiment, which is currently at a 14 year high.
The political turnover at the White House does little to calm jittery trader nerves.
And then, there’s Facebook whose shares have been tumbling and management stumbling over accusations it’s lost control of user data.
Markets fret that Facebook and other tech earnings will no longer be the mega stars they have been over the last year or so.
For all those reasons, the mood in the markets has changed dramatically in the first three months of 2018.
There is one more reason not often spoken about in the hallowed halls of the stock markets, and that is that President Trump may not be the economic savior for the U.S. that he set himself up to be.
The markets went all in on in 2016 they talk about it only behind their hands and in quiet out of the way corners.
Let’s see what happens in the second quarter when the U.S. corporate earnings are expected to still be strong, as people watch to see if wild ride continues.