As foreshadowed, we are now seeing the sharp reversal in asset prices, which were driven through the roof due to ultra-low interest rates, central bank quantitative easing, and government support through COVID plus huge debt growth.
Of course, the recent gains were largely spurious, and a correction was always going to come – hopefully some watching our shows are best prepared for this process (which will take some time), but be clear wealth will be destroyed across property, shares, bonds, metals and crypto.
No surprise then that U.S. stocks ended sharply lower on Friday, tumbling to two-month lows as a warning of impending global slowdown from FedEx hastened investors’ flight to safety at the conclusion of a tumultuous week.
The session also marked the monthly options expiry, which occurs on the third Friday of every month. Options-hedging activity has amplified market moves this year, contributing to heightened volatility.
All three major U.S. stock indexes slid to levels not touched since mid-July, with the S&P 500 closing below 3,900, a closely watched support level and suffering its worst weekly percentage plunge since June.
“It’s been a tough week. It feels Halloween came early” said David Carter, managing director at JPMorgan in New York. “We are facing in this toxic brew of high inflation, high interest rates and low growth, which isn’t good for stock or bond markets.”
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