Wall Street ends a volatile 2018 plagued by fears of slowdown

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Wall Street ends a volatile 2018 plagued by fears of slowdown Merchants work on Wall Street in New York, United States. EFE / Archive

Wall Street is preparing to bid farewell to an erratic 2018 in which it has gone from recording triple records in its indicators to erasing all accumulated profits, among the fear of a slowdown in the global economy, the trade war with China or the monetary adjustment of the Federal Reserve.

“The volatility we have experienced this year brings back memories of the days of the financial crisis of 2008,” Jesse Cohen, senior analyst at Investing.com, told Efe, describing the behavior of the markets as “erratic”, especially after a December with sessions as they are not remembered since the Great Depression.

After closing a luxury 2017, the Industrial Dow Jones, reference index, began the new year unstoppable and linked nine historical brands until January 24, but then came a long drought of almost eight months that saw no new record until September 20, although the streak would last little.

The ceiling of the indicator this year stood at 26,951.81 points, an extreme that now seems far since now dismisses the year with just over 23,000 whole, with the Government closed for lack of budget agreement, the rates of interest to the rise and still pending of a commercial agreement between Washington and Beijing.

However, at the end of last August Wall Street was pleased to go through the longest cycle in history, which began on March 9, 2009, emerging from the financial crisis.

There followed an October that was a blow to the markets, erasing much of its profits for fear that the Federal Reserve would adopt a hard line in its policy of monetary adjustment, which ultimately meant four increases in interest rates in 2018.

Fed President Jerome Powell considered the price of money in the US it was “far” from a neutral level, which led to that “red October” in which the technology sector suffered a knock-down and its main companies entered into bearish phases.

The exbillonarios Apple and Amazon, altogether with Facebook, Netflix and Alphabet (denominated FAANG), were very harmed during that month of quarterly results, and have erased about 800,000 million dollars of capitalization.
In mid-November they entered a bearish cycle, when they were devalued by 20% with respect to their maximum value of the last 52 weeks. Nasdaq himself says goodbye to the year in the bear market.

“It definitely seems that the best days of the FAANG have been left behind, since most have changed their character in recent weeks and do not push up the market,” Cohen said.

This year also worried the mid-term legislative, held on November 6, although the markets reacted with good spirit to see the power divided between Republicans and Democrats.

A few days before the end of 2018, analysts such as veteran investor Art Cashin considered the G20 meeting held in Buenos Aires to be key, waiting for “some kind of agreement” between President Trump and his Chinese counterpart, Xi Jinping.

A 90-day commercial “truce” arose from the dinner between the presidents, but the initial optimism with which the investors received it was quickly deflated by concerns over the possible impact of the detention of Huawei’s financial director and the self-proclamation of Trump as a “man of tariffs”.

Moody’s analyst Atsi Sheth indicated in a note that the US and China have “deep and multifaceted differences, which lead to divergent national and commercial interests,” and that their relationship “has entered a new, tense and uncertain phase.”

The US protectionist agenda has discouraged markets in recent months, which fear a slowdown in the economy despite recent data reflecting its good health in the US.

To make matters worse, on December 4, Wall Street collapsed with a cut of almost 800 points in the Dow Jones, discouraged by the evolution of the yield curve of public bonds, in which some analysts see a signal of recession.

“It is not a matter of whether the bullish phase is going to end, but when, a decline of 20% has been falling for some time,” Cohen said, for which factors such as “escalation” in the US tensions will be decisive in 2019. US-China or the “verbal attacks” of Trump to the Fed, which has put Jerome Powell in the spotlight.

The icing on the cake was December, of the worst months that are remembered because you have to go back to October 2008 to reach such low indicators in the reference indexes.

The last weeks are happening like a roller coaster, since one day the worst Christmas Eve session in history is recorded and another day the Dow climbs in 24 hours over a thousand points breaking records. The rates go up and the government remains closed, but Wall Street still stands. (EFEUSA) .-

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