2018, the year in which volatility returned to Wall Street



Bloomberg.

The main indices of the New York Stock Exchange reached their worst result since 2008 and the profits of the companies remain stagnant.

After a record 2017, volatility returned to Wall Street in 2018, due to the rise in interest rates, the fear of global economic stagnation and the uncertainty caused by the decisions of US President Donald Trump.

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"At the same time last year we talked about a & rd; unbridled & # 39; 2017," recalls Scott Wren, an analyst at Wells Fargo Bank. "The contrast is great this year."

This Monday, a few hours after the end of the last session of 2018, the three main indices of Wall Street, Dow Jones, Nasdaq and S & P 500 declined by 5.9%, 4.1% and 6.5% respectively. the worst result since 2008 all year round. Last year it rose by 25.1%, 28.2% and 19.4%.

The damage was not more serious due to the excellent results of the companies, whose profit increased by 20.3% in 2018, according to predictions from the company Factset, something that has been unprecedented since 2010.

But the outlook for a stagnation of these benefits in 2019, along with signs of a slowdown in world growth in a period of rising US interest rates, caused a slowdown in Wall Street.

This situation also affected the decline in world indexes in 2018. The London FTSE-100 closed the year with 12.5%, the Paris CAC 40 fell 11% and the Frankfurt Dax lost 18.3%. And on the Asian stock markets, Hong Kong fell 13.6%, Shanghai 24.6% and Shenzhen with 33.2%.

The first shocks came in February. Investors then feared that the level of US wages would cause a sharp rise in inflation and thus a higher interest rate hike for the central bank (Fed).

The institution headed by Jerome Powell started in 2015 with a policy of monetary restriction, which will gradually lock access to cheap loans, which investors and citizens have benefited enormously during the crisis, giving the feeling that an era is coming to an end of gold in the financial community. The rates rose four times in 2018 by a quarter point.

In the months that followed, investors reassured themselves, mainly thanks to the operating results, which enabled Wall Street to return to historical records between June and September. However, the euphoria quickly disappeared when Powell announced in October that the Fed was considering speeding up the rate hike.

Attacks by Donald Trump

The technological values, which are largely dependent on the good economic health of the United States and the world, have seen the consequences of the announcement: Apple, which lost 7.7% in the year, lost 33% since the beginning of October, and Alphabet, Google's parent company, declined by 0.6% and 13.5% in the same periods.

At the end of this complicated year, December was disastrous. Before the end of Monday, the Dow Jones was the worst twelfth month of the year since 1931, with strong volatility that had not existed for a long time.

The fears caused by the monetary restriction reached the White House. Trump has multiplied the attacks on the Fed's president on Twitter, which he named at the end of 2017.

But the results on Wall Street are not only due to measures taken by central banks. "The President's commercial war and his attacks on the Fed are the biggest problem that affects the markets," said Ian Shepherdson, an analyst at Pantheon Macro.

And it is true that the tariffs imposed on steel, aluminum and a wide range of Chinese products, and similar measures taken by Beijing as retaliation, led to the fall of the markets.

Also read: factors that destroyed the Wall Street shares

Trump, who often calls Wall Street as an example of the success of his policy, has avoided the issue in recent weeks. But despite the depreciation, the president can boast that he has contributed to the strong rise of the Dow Jones and Nasdaq (+ 20.5% and 21.1% respectively) since the date of his election, the 8 November 2016


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