In a word…PAIN
Wall Street has been rocked this week as it endured its 5th straight losing session. In the last five days, the DOW has lost over 850 points. Since their high’s in mid-September, the markets on Wall Street have seen an average loss of 9% and over $1.5 Trillion of value was wiped away.
The Dow opened badly on Wednesday, and then things got worse as it plummeted 460 points in early morning trading before reclaiming some of the early losses and ended up down 173 points. The 10 companies of the Russell 2000 experienced the worst pain as that index is now down over 16% from its high of September 19th. At 8.7 percent, the S&P 500 decline that began 19 days ago now eclipses three earlier retreats this year and is the biggest since equities plunged 9.9 percent starting in April 2012. European stocks fell the most in almost three years today, taking their decline from a June high to 11 percent.
The late rally in today’s markets is of little comfort to investors shell shocked from a series poor economic global data. Ebola, Isis, Ukraine, China protests all have further stressed the bad news coming from the global markets already struggling with slow growth and deflationary concerns. The falling price of oil has further damaged the markets.
The main beneficiary of the market turmoil over the past ten days has been gold. Gold hit a triple bottom of $1183 per ounce earlier this month and has since bounced back to $1241 an ounce late Wednesday for a $57 gain from its near four year low. Many investors are rushing into the security of metals in the light of the recent global market volatility especially as metals have been trading at near four year lows.
It’s anybody’s guess what happens next. Will our markets rebound, or is this the beginning of a much greater equity sell-off? One thing is certain, there is a lot of news out there and none of it looks very positive. Investor sentiment has clearly been pummeled of late as some signs of surrender are forming,” Tobias Levkovich, Citigroup Inc.’s chief U.S. equity strategist in New York, wrote in a note today. “While no one ever rings a bell at the bottom and there is not generally a cathartic, cataclysmic crescendo of capitulation, fear is emerging!”
With oil prices hinting at deflationary symptoms, QE ending, and with the central banks and their easy credit policies now having less ability to affect growth, there are few safe havens for investors.
Of note: Despite the hot September the paper markets enjoyed, the US Mint reported record sales in September for Gold American Eagles selling over 58,000 ounces and more than doubling the 28,000 ounces sold in August. The spot price reduction, caused by the near term strengthening of the dollar, has made the physical shiny asset a great bargain, and the savviest investors didn’t miss the opportunity.