There are myriad different reasons you could point to in order to explain the market’s monstrous performance this Wednesday, a fact that in and of itself has forced investors beyond the tipping point of acute anxiety into a full-blown breakdown.
As a kind of nightmarish roll call, you have, DEEP BREATH: an impending national lockdown in France, a likely ‘lockdown light’ in Germany, the kind of numbers that would justify a ‘circuit breaker’ in the UK, and half a million covid-19 cases in the last week in the USA. Not to mention comments from the UK Vaccine Taskforce, claiming – obviously, but no less dishearteningly – that the first batch of vaccines ‘is likely to be imperfect’.
And that’s just the pandemic. You’ve also got the lack of pre-election stimulus over in the States, and what that will mean for the short-term hopes of a package if Joe Biden dethrones Donald Trump.
Then, of course, there’s the election itself. Haunted by memories of 2016’s sure-fire Hillary Clinton victory, Biden’s sizeable lead in the polls isn’t providing any comfort for investors. Nor is the thought of how Trump might react if he does indeed lose.
It’s more uncertainty in the most uncertain of times, and has had a punishing impact on the Western markets.
The Dow Jones donned its speedos and took a dive after the bell, plunging 860 points to a near-3-month nadir just above 26,600. It’s been a hell of a week for the Dow – and remember, the election’s not until next Tuesday! – with the index currently down around 1600 points since Monday afternoon.
As tends to be the case, that US bloodbath only tightened the screws on European indices – which is pretty scary given how badly they were flogged during the morning session.
The DAX took the dubious title of Wednesday’s worst performer, sinking 5-whole-percent as it tumbled below 11,500 for the first time in almost exactly 5-months. For context, the German bourse opened the week above 12,600.
The CAC wasn’t too far behind its Teutonic cousin, dropping 4.6% as it desperately clung on above 4500.
The FTSE performed better than its European peers, though better in this case still translated to a 3.6% decline, forcing the index to 5530 for the first time in close to 7-months.
Tomorrow should bring with it news of a sharp third quarter rebound for the US economy, with analysts forecasting growth of 32% at the annualised rate, compared to the 31.4% contraction suffered in Q2. Whether or not that means anything to investors at this point, however, is another question entirely – last quarter’s figures don’t matter as much when the current quarter looks so dire.
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