Dow Jones Index and the Worst Christmas Present Ever for the Economy
USA – December 25, 2018
As the whole nation is now celebrating the sacred holiday of Christmas and unwrapping long-awaited presents, the news coming from the financial sector is as bad as can be, as the Dow Jones Index showed the worst Christmas Eve dive in history yesterday.
Never mind finding coal in your stocking for the holidays: Wall Street investors scored a rare - and unwanted - gift this year. The S&P 500 index SPX fell by 2.7% Monday, marking the first session before Christmas ever that the broad-market benchmark has booked a loss of 1% or greater!
The numbers have been confirmed by Dow Jones Market Data, which said the largest decline in the index on the trading day before Christmas was Dec. 23 in 1933. Need we remind you what the U.S. was going through 85 years ago? That’s right: It was the era of the Great Depression.
As a result of another extremely nervous and turbulent week in financial markets, the U.S. Secretary of Treasury Steven Mnuchin disclosed calls with the heads of the most powerful banks of the country: Bank of America, Citi, Goldman Sachs, JP Morgan Chase, Morgan Stanley and Wells Fargo. Mnuchin said that all CEOs assured him they have ample money to finance all their normal operations, even though there haven't been any serious liquidity concerns rattling the market. The words of the Secretary of Treasury always matter, thus his revelation only added to the underlying worries that have gripped markets of late.
Another reason for the market panic this year is that traders simply don’t trust Mnuchin and don’t take his comments seriously.
"Reports of Steve Mnuchin meeting with decision-makers will not provide much Christmas cheer," said Chris Beauchamp, chief market analyst at IG. "Mnuchin is most likely worried about his job, but everyone else will draw the conclusion that there is perhaps much more to worry about," Beauchamp said.
Moreover, the current market dynamic has it set for its worst monthly and yearly decline in about a decade, amid nagging concerns that the Federal Reserve is normalizing interest rates too rapidly. The risks of a domestic recession are also high, as the continuing tariff dispute between China and the U.S. could devolve and “help” it.