The Art of Mastering Finance

Reasons For the Fall of Dow Jones Industrial Average

If you are an investor, even if you are only starting, you may have heard about Dow Jones Industrial Average, which is a stock market index. Still named Dow, this Dow Jones Industrial Average is established on thirty large public trading companies on any given trading day. The phrase Dow stock is used by both investors and media to explain the general health review of the entire stock market. This work will discuss the trend of the Dow Jones Industrial Average in detail.

The Dow Jones Industrial Average fell by seven hundred points as an aggressive market sell-off collapsed hope for a turn around on 4th December 2018. The day before had seen a moderate stock bounce back, and the investors were wondering on why the Dow Jones Industrial Average fell the day after. Earlier than this situation materialized, the White House had communicated of a non-permanent truce between China and the US (United States) who are famous trade enemies. Nonetheless, the American government has flickered on offering solid information showing the concessions that China made during the G-20 summit, after the truce was announced.

The US agreed to wait on the threat they had issued of increasing tariffs on The Chine goods. Still, judging on the statements issued by the delegates of the two countries, little was agreed on during that meeting. What succeeded was a disorder caused by the Trump administration and the White House advisor giving out dissimilar statements on when the hold on tariffs would commence. The disparities left investors to wonder if substantial success between the two nations can be arrived at in the foreseeable future. The investors have lost faith, and the marketers are getting worried regarding a recession that is hinting to be around the corner.

During the same day, the yields of the 10-year Treasury bonds fell to the lowest level in a period of ten years. Although the yields for the ten-year bonds have been fluctuating over time, the investors are bothered this time since it has caused flattening of the bond yield curve. This implies that the yield of two-year bonds will enlarge while the ten-year bonds yields will lessen. It also usually hints that inflation and betting interest rates of investors will go down for the next ten years. These are warnings of a recession because they define the default financial atmosphere in such cases.

Last but not least, the stock markets do not generally move into a phase of aggressive sale-off unless the yield curve overturns. This means that the two-year Treasury bond yields rise above those of ten-year bond.

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