As a seasoned crypto investor with a decade of market experience under my belt, I must say that the recent global market volatility has me on high alert. The $4.1 trillion market cap plunge in just a week is reminiscent of the turbulent times we witnessed during the 2008 financial crisis.
Last week, the worldwide stock market experienced a significant decrease in market value totaling approximately $4.1 trillion, marking its steepest decline in two years. This downturn was due to a broad market correction, triggered by ambiguous U.S. jobs data and mounting deflationary pressures in China.
As reported by the financial platform Kobeissi Letter on social media X (previously known as Twitter), global stocks experienced a significant decrease of approximately $4.1 trillion within a week. This decline was more than double the largest previous drop, which occurred in 2024. The U.S. market, specifically, accounted for about 54% of this fall following a 4.3% decrease in the S&P 500 index and a 5.8% plunge in the technology-focused Nasdaq.
The turbulence in global markets has resurfaced:
— The Kobeissi Letter (@KobeissiLetter) September 9, 2024
In my role as an analyst, I’m observing a significant decrease in asset values, a phenomenon commonly referred to as a ‘sell-off’. This event is triggered by the fact that the accumulated annual interest costs on U.S. Federal debt have exceeded the $1.1 trillion threshold during the second quarter of the year. Consequently, the government finds itself paying an unprecedented $3 billion every day in interest on its outstanding debt.
2022 saw the Federal Reserve gradually increasing interest rates as a means to combat inflation, with the process continuing until late 2023, when the Fed Funds rate settled at 5.5%. Despite predictions for interest rate reductions this month, the nation’s debt has continued to escalate, surpassing $35.3 trillion.
According to the Kobeissi Letter, over time, the confluence of rising interest rates and mounting national debts has made interest one of the biggest annual expenditures for the U.S., essentially.
Significantly, technology equities experienced a significant decline in market value exceeding $1 trillion during a single trading day due to a widespread sell-off of large-cap tech stocks. For instance, Nvidia (NVDA), a company that has been gaining momentum from AI growth expectations, saw its market capitalization drop by more than $360 billion, including losses in after-hours trading as well.
As an analyst, I’ve observed a persistent sluggishness in Nvidia’s growth sector, which seems to be a consequence of the ongoing high interest rates. Furthermore, two manufacturing activity indicators have consistently reflected this lethargy. The upcoming US August jobs report, due later this week, could potentially introduce more market turbulence, as the unexpectedly hot unemployment rate in July triggered a stock market downturn.
As stated by Investopedia, it’s worth noting that among all months in the calendar, September is unique in having shown negative returns over the past 98 years. This phenomenon, called the “September Effect,” indicates a tendency for the stock market to perform poorly during this month, due to historical underperformance.
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2024-09-10 20:08