Saudi Arabia

Here's why the markets tanked so hard today

from Think Advisor,

Growing tensions between Saudi Arabia and Iran may be a bigger factor for financial markets than China's economy.

Blame it on China or revived tensions between Saudi Arabia and Iran, or both. Events in those countries triggered a massive selloff in global stock markets Monday, leading at one point to a 450-point drop in the Dow Jones Industrial Average. By midday, the Dow was down 350 points and the S&P 500 was off 40 points — both down about 2% from the previous close on Dec. 31 — then sank again before recovering to end the session off a little more than 1.5%. The rout began in China when the government there reported a larger than expected drop in manufacturing activity in data (known as the PMI report), marking the 10th consecutive decline in that index. Chinese stocks plummeted, triggering circuit breakers that were used for the very first time. Trading was initially stalled for 15 minutes, then halted altogether after the Shanghai Shenzhen CSI 300 Index dropped 7%.

Adding to the downturn were growing tensions between Saudi Arabia and Iran, and their allies.

Oil prices spiked higher, then retreated on the news. “The markets have overreacted,” says Hugh Johnson, chairman and chief investment officer of Hugh Johnson Advisors. “China is a problem, but is it that big a problem? No.” Indeed, David Dollar, a senior fellow at Brookings’ John L. Thornton China Center, says, “The actual economic news from China is not bad" and “there is no evidence of a hard landing so far.”

Jeffrey Saut, chief investment strategist at Raymond James & Associates, says the situation between Saudi Arabia and Iran is a bigger problem for the market than China’s stock slide because the Chinese government will do everything it can to prevent a complete market collapse, while long-standing tensions between Saudi Arabia and Iran will be more difficult to resolve. ... Saut sees signs of strength in the Chinese economy. China is “no longer building bridges to nowhere," says Saut, but boosting domestic production. “IPhone sales are up 80%, year over year and Nike sales are more than 30%.”

2015 suffered their first year of negative returns since 2008.

2015 was the hardest year to make money in 78 years.

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