US stock market reaction indicates significant fear
Throughout the past week, strategists like CNBC’s Jim Cramer said they are fearful of the US stock market trend because of gold’s explosive rally.
Within three weeks, theprice of gold jumped by more than 7.5 percent; in the last hours, it surged above $ 1,
There is little resistance for gold from $ 1, 728 to $ 1, and as such, analysts warned that fear of missing out (FOMO) in the gold market could add to the downtrend of the stock market.
Up until Iranian response this evening, the Dow Jones was relatively stable. It even posted minor gains on Monday,leading investors to believe the market has already priced in a worse altercation between the U.S. and Iran.
However, a near 2% fall for the Dow Jones during after-hours trading indicates the US stock market did not price in direct attacks on U.S. troops by Iran and the precarious direction the conflict has taken.************************************ (Source:The Spectator Index reports that Iranian jets have left air bases in Iran, indicating that theIranian government intends to further provoke the USin response to Soleimani’s passing last week. Even a rate cut may not be enough
An additional rate cut has beenhinted by major central banks including the Fed and the European Central Bank (ECB)in the past several days.
As geopolitical risks intensify amidst fears of a full blown war with Iran, the Fed and central banks in Europe could eye an extra rate cut in the first half of 2020.
The US stock market and the Dow Jones have not responded with such large daily movements during trade discussions with China,even when the entire deal was at risk of falling out.
Whether relaxed financial conditions and a low interest rate are sufficient to calm markets that are clearly rattled by the crisis in the Middle East remains to be seen.
Still, the market’s heavy response to the Middle East conflict almost immediately afterthe Fed’s injection of new liquiditywill likely serve as a dire warning to investors that the current stock market downtrend cannot be dismissed.
The above should not be considered trading advice from CCN.
This article was edited byGerelyn Terzo (**********************************.
Last modified: January 8, (1:) ********************************************************** (AM UTC
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