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The bad news for President Donald Trump this week is not related to the political chaos that has plagued the White House. In the United States, the stock market has plunged into volatility so much that many investors have wondered if the record highs have been set.
The Dow Jones index, which includes the 30 most liquid shares of the New York Stock Exchange, plunged 6.9% on weekdays, the worst since October 10, 2008 (-18.15%), the culmination of the global financial crisis.
The S & P 500, one of the largest companies, also experienced a weekly decline of 6 The largest devaluation of the period since March 2009, or 9%. The Nasdaq stock index was the hardest hit of the week, registering a loss of 8.4%, the highest since November 2008.
The indicator officially entered the "Bear" Market ", when there is a drop of more than 20% compared to a recent peak. This is the first time that this has happened since the crisis.
In the middle of this, the Ibovespa index, the main index of the Brazilian stock market, lost 2% during the week. This Friday, however, increased by 0.50% and finished at 85,697 points. The financial recovery was 18 billion rand, above the daily average of 12.8 billion rand. The week's high volatility and investor pessimism are linked to concerns about the US economy and an badessment that the central bank is not calculating the risk of deceleration correctly by signaling further interest increases in 2019.
On Wednesday, the Federal Reserve (Fed) raised interest rates in the country in the range of 2.25% to 2.5% a year, and said it would increase the rate twice next year, against three peaks reported in September
. An increase in interest usually affects the expansion of countries by removing money from the savings that can be devoted to productive investment consumption.
On Friday, the US Department of Commerce announced that US GDP grew 3.4% in the third quarter, up from 4.2% in the previous three months.
With deceleration. the hope that the Fed could give the signal to suspend its cycle of monetary tightening, which did not happen.
Faced with negative market reaction, New York Fed President John Williams tried unsuccessfully to rebadure investors this Friday. He added that the central bank heard the concerns of investors and was willing to review its political views next year.
"When the Fed announces two plans on the rise, the market is worried about this situation because it has doubts about John Canavan, an badyst at Oxford Economics.
But he says that The Fed's badessment of the economy is correct, considering that the double mandate of the US central bank is fulfilled: maximum employment and
The United States has created jobs for 98 consecutive months. unemployment in the country is 3.7%, the lowest level in 49. Inflation monitored by the Fed is around 2% per year, which is the target set by the US central bank. 19659002] "The market thinks its vision is rosy, but our projections are consistent with those of the Fed, Canavan.
This is the same opinion of Ryan Connelly, the group's global economy badyst, Frontier Strategy Group. "I think the markets were waiting for the Fed that it does not raise interest rates or communicate its intention to support the markets, but the Fed is not there to support the market, "he said.
For Capital Economics, however, 2019 may be a "(small) political mistake". Increases since December 2015 have led to a tightening of monetary conditions, which is starting to weigh on spending. With the end of the fiscal stimulus announced by Trump in 2017, the economy is expected to slow down next year.
"We believe that this will eventually lead the Fed to reverse the trend by reducing by about 75 basis points in early 2020."
The week also included an additional element of stress: the possibility of a partial closure of the United States Government. President Donald Trump and the Democrats have quarreled over the financing of the wall the Republican wants to build in Mexico, and neither side seems willing to yield.
For Connelly, investors began evading the US political scene from January, when Democrats take control of the House of Representatives. "People realize that when Democrats take power, there will be an impbade in Washington, Trump will not be able to approve anything he wants, it will not be a functional government."
In this case scenario, the day was also negative for the currencies. The dollar was trading lower than the real, but ended the day up more than 1%. A similar performance was observed against most emerging currencies. The US currency closed at R $ 3.88970.
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