Market turmoil and safe havens

by Standard & Poor’s 500 After falling nearly 4% from its all-time high earlier in July, markets appear to be correcting slightly so far. Of course, the more than 1% rise in its major indices has also contributed to that. Wall Street In Friday’s trading, following encouraging data from economic inflationHowever, the general feeling is that stock markets have entered a period of increased volatility and any serious trigger could lead to a serious sell-off.

A sharp and massive drop, in other words, similar to the one that occurred last Wednesday, when tech giants saw investors liquidate their money en masse, liquidating nearly $1 trillion in dollar cap, in Wall Street’s worst day since 2022. The tech selloff has prompted many analysts to talk of a “crunch time” for stocks and a “tipping point” that will see markets correct with noise.

the Big Tech They have one chance…to turn things around in the week that begins, although many analysts warn it is too late. The results will be announced on Tuesday. Microsoft And he takes the stick on Wednesday Metawith the apple And Amazon To be continued on Thursday. If these giants disappoint, the markets will pass a very crucial test. The main concern for investors is the compression of profit margins due to increased investments in the field of artificial intelligence.After all, that was the reason at the time. Google Higher-than-expected revenue contributed to Wednesday’s sell-off, with AI investments totaling $13 billion in the second quarter alone.

Now, the prevailing view is that a major correction is inevitable, and the only question that needs to be answered is when it will happen and how big it will be. It is not unreasonable to have this feeling in the air, after a nearly 7-year rally, Technology Nasdaq Its capital has tripled. The fact that the last time it reached these levels was before the dot-com bubble burst strengthens the arguments of those who believe that history will repeat itself.

It also makes sense to cause a bit of panic in global markets when shares of US tech giants like Microsoft rise. NvidiaApple and Google took such a big hit in a single day, with losses exceeding 6%. Investors fear that the AI-fueled rally, which has been fueling the market for over a year and a half, may be coming to an end. For this reason, it is very likely that on any significant occasion we will see a bigger sell-off, especially in terms of duration.

Meanwhile, bond markets are worried about the possibility of a recession in the country. United States of America And EuropeThis is due to the effects of two years of very high interest rates, while commodity markets fear a repeat of the economic slowdown in China in 2015.

The question is whether there are now any safe havens that can protect investors in the event of a disaster. While the gold Other low-risk assets, such as government bonds of strong economies, such as the USA, Germany, etc., traditionally play this role, and there have been cases in the past when the decline was general.

However, gold remains the only safe haven that remains unshakable for many. Let’s assume at this point that gold is about 4.2% below its all-time high, with its price up 22.61% in the past year. JPMorgan Gold is estimated to average $2,500 in the fourth quarter of 2024, which is also the quarter of the US presidential election. But these forecasts do not include the risk of a market correction, as well as the risk of geopolitical turmoil.