Like an unexpected gust of wind that blows the hat off your head or flips your umbrella inside out, last week’s stock market performance startled investors.
Looking back, it’s easy to identify some of the factors that may have contributed to investors’ unease and shaken confidence in the markets. Ben Levisohn of Barron’s offered a brief rundown that included:
The yield on 10-year Treasuries rising to a seven-year high. As interest rates move higher, bonds become more attractive to investors who prefer to take less risk. They move money from stocks into bonds and that can push stock prices lower.
Federal Reserve Chairman Jerome Powell suggesting the Fed funds target rate could move higher. Investors worry the Federal Reserve is too hawkish and will raise rates too high, too quickly, causing economic growth to stumble.
A speech by Vice President Mike Pence indicating tensions with China may persist. Companies that export to China or manufacture goods in China are at risk if relations between China and the United States don’t improve. Poor relations could affect profits, share values, and economic growth.
Earnings reports showing tariffs negatively affecting some companies’ profit margins. FactSet reported, “the term ‘tariff’ has been mentioned during the earnings calls of 12 S&P 500 companies to date, with six of these 12 companies citing a negative impact linked to tariffs.”
The International Monetary Fund (IMF) lowering its economic growth projections. Concern about the impact of trade tensions on companies around the world led the IMF to lower some of its economic growth estimates for 2018, especially in Asia and emerging markets.
Some analysts believe a desire to take profits also helped fuel the downturn, according to Barron’s Randall W. Forsyth.