ICFiles
SOC 2

CPA Website Content

Secure File Transfer Soc 2 starts at $1 per month

Join Us

 

 
Financial Calculators
Financial Calculators
 
Federal Tax Links
Federal Tax Links
 
Financial Terms Glossary
Financial Terms Glossary
 
Cartoon of the Month
Cartoon of the Month
 

Volatility Returns - Finally

Stock Market News

March 2018

Buy

Volatility Returns - Finally

Volatility Returns, Stock Market New Feb Mar 2018After months of warnings from Wall Street that the markets’ extraordinarily long bull run could not last forever, the inevitable happened. Volatility returned to U.S. markets in a major way in February. The precipitous falls that happened on Feb. 2 and 5 were all the more shocking to investors because the market trend for many months had been almost consistently upward.

Investors got over their initial shock, and the decline became much less scary when investors calculated that the staggering 1,175 drop in the Dow Joes Industrial Average (DJIA) on Feb. 5 – although the biggest drop ever in absolute terms – had only taken share prices back to their starting point at the beginning of 2018. The incredible upswing since Jan. 1 had taken the DJIA so high in such a short amount of time, that this seeming correction in February in fact represented a decline in value of only 4.6 percent. This all being said, the return of volatility in the U.S. markets had a sobering effect on stocks worldwide during the first week of February. In London, the Financial Times Stock Exchange (FTSE) 100 fell 8.2 percent from its record high in January, and the MSCI Emerging Markets Index dropped by 7.5 percent. An element of calm was restored to international markets when the Dow rebounded quickly following its alarming decline, but major U.S. stock indices continued to gyrate throughout the month, logging gains only to give them up a day or so later.

What is Fueling the Turbulence?

Many analysts have suggested that uncertainty over interest rates is a major factor. Both the Federal Reserve Bank in the United States and the Bank of England have begun to increase interest rates and curtail their respective “quantitative easing” policies. Monetary policy going forward is less certain. In the United States, the Fed has undergone a change of leadership as Janet Yellen has departed and Trump appointee Jerome Powell assumes the role of chairman. Nervous speculation regarding monetary policy was fueled when the minutes from the January 2018 Federal Open Market Committee meeting were released in late February. Many who reviewed those minutes felt they indicated a more hawkish approach to monetary policy. Some economists also have voiced concern over possible increases in inflation rates in response to global economic growth. These concerns seem to be as yet unfounded, with core inflation in the United States (excluding food and energy) at 1.5 percent.

Positive News

Many Wall Street analysts remain optimistic and see February’s market turbulence as a temporary hiccup. Leading economic indicators suggest that economic growth in the United States will be strong in the first half of 2018. They note that fourth quarter earnings for 2017 have been good, with the Standard & Poor (S&P) 500 Index showing profits up by 13 percent and sales up 8 percent over last year. They believe the corporate tax cuts also will help boost profits, and that shareholders will benefit from cash-rich corporations buying back shares.

It remains to be seen whether they are right and that the recent market turbulence was a short-term reaction to monetary policy concerns, or if February’s gyrations were a precursor of more volatility to come.

The observations above are general commentary and are not intended to replace the advice of your professional investment and tax advisors.

Buy

 

These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact their CPA regarding the topics in these articles.

Protected by Copyscape Plagiarism Finder

Dynamic Content Powered by Service2client.com
SEO Content Powered by DynamicPost.net

ICFiles
SOC 2

CPA Website Content

Secure File Transfer Soc 2 starts at $1 per month

Join Us

 

CPA Website Content

 
 
Financial Calculators
Financial Calculators
 
Federal Tax Links
Federal Tax Links
 
Financial Terms Glossary
Financial Terms Glossary
 
Cartoon of the Month
Cartoon of the Month
 
websites for cpas

MyWeb, WordPress Joomla, Drupal
1 Click Hosting
Install free themes

websites for cpas

Click

 
Tax Calendar
Tax Calendar
 
State Tax Links
State Tax Links
 
Track your Refund
Track your Refund
 
Library Articles
Library Articles
 
 
 

CLOSE