Market Crashes Christmas...?
The Dow Jones Industrial Average?sank deeper into the history books on Wednesday, with the index posting its 10th straight losing day as a disappointing rate outlook by the Federal Reserve rocked the stock market.? The Dow lost 1,123.03 points, or 2.58%, to 42,326.87, for its worst losing streak since an 11-day slide in 1974. The Wednesday decline was its worst since August and only the second time it lost 1,000 points this year in one session. The S&P 500? lost 2.95% to 5,872.16 and the Nasdaq Composite?shed 3.56% to 19,392.69 with losses intensifying into the close of trading. Hmmmm. Fed Chair Powell has so much power to crush the market... Was there a better way to cut 25 basis points and a much better way to word his messages...? Hmmmm.
The central bank reduced its overnight borrowing rate by a quarter point to a target range of 4.25% to 4.5%, as expected. However, the Fed indicated Wednesday afternoon it would only cut rates twice in 2025, fewer than the four cuts given in its last forecast. Fed Chair Jerome Powell said the central bank’s move to cut rates in recent months allows it to “be more cautious as we consider more adjustments to our policy rate.”? Before Wednesday, traders were hoping the Fed would stay aggressive with rate cuts in 2025, fueling the bull market further. Treasury yields jumped following the Fed’s cautious outlook, pressuring share prices. The 10-year Treasury yield crossed above 4.50%.
So “Goodbye punch bowl. No Christmas cheer from the Fed. Policymakers see higher inflation and lower unemployment in 2024"... Before it intensified on Wednesday, the Dow’s worst funk in decades was mostly caused by a rotation out of old economy shares and into technology stocks, a sector that the century-old measure underweights compared to broader market metrics.? But the whole market was rocked on Wednesday. The S&P 500′s loss was also its worst since August and cut its 2024 gain to 23%.
I. Why the massive drop? Questions and worries... How can individuals and small businesses prepare for this historical plunge? What precautions are ahead?
The Dow Jones Industrial Average plunged massively by 1,123 points (2.6%) after the Federal Reserve cut interest rates by 25 basis points. This drop marked the Dow's longest losing streak since 1974, lasting 10 consecutive days.?? This massive drop occurred due to several factors:
1)?Fewer expected rate cuts: The Fed projected only two rate cuts in 2025, down from the previously anticipated four.
2) Inflation concerns: The Fed now expects inflation to remain above its target range for longer than initially predicted.
3)?Hawkish outlook: Fed Chair Jerome Powell's comments suggested a more cautious approach to future rate adjustments.
II. Preparing for Market Volatility.?????? Individuals and small businesses can take the following steps to prepare for potential market volatility:
1.??Diversify investments: ?????Spread risk across various asset classes and sectors.
2.??Build an emergency fund: ?????Maintain liquid savings to cover 3-6 months of expenses.
3.??Review and adjust debt: ?????Consider refinancing high-interest debt with low rates.
4.? Invest in quality: ?????Focus on companies with strong fundamentals and consistent performance.
5.??Stay informed: ?????Monitor economic indicators and Fed announcements.
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III. Precautions Ahead.
1.?Expect market fluctuations: ?????Prepare for continued volatility as markets adjust to the new rate environment.
2.?Be cautious with borrowing: ?????While rates may decrease, avoid taking on unnecessary debt.
3.?Review business strategies:???? ?Small businesses should assess their financial positions and adapt to changing economic conditions.
4.?Consider long-term perspective: ?????Avoid making rash decisions based on short-term market movements.
5.?Consult financial advisors: ?????Seek professional advice for personalized strategies to navigate uncertain times.
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Remember that market corrections are normal, and maintaining a long-term perspective is crucial during periods of volatility. Hmmmm. Also remember, that when a disaster occurs, there is a great opportunity. There may be a buying opportunity for a beaten-down, fundamentally sound company that will weather the storm and prosper, perhaps... Be vigilant.
~S. Vincent Shin, ?????www.dhirubhai.net/in/vshin
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Be Vigilant. Be Safe.
“Stay Curious” and “Think for Yourself.”?? Always decide on your terms.? This is my research and analysis. Perhaps you should take a closer look at them and do additional investigation and scrutiny if they interest you. (SVS)
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Reference and Future Related Research:
What are the main factors contributing to the Dow's longest losing streak since 1974?
How did the Fed's projection of only two rate cuts in 2025 impact market expectations?
What specific actions can individuals take to protect their investments during market downturns?
How can small businesses prepare for potential economic instability?
What are the implications of the Fed's hawkish commentary on future monetary policy?
Analytic--Investor--Student
1 个月Lee Seng Sze REEM,CIPM,CEA Malaysia ???? aloha.
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2 个月Thanks for sharing
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2 个月William Harrison Mele Kalikimaka ??
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2 个月Victor Sarateanu aloha. Happy Holidays.