The Magazine for Asian Investors
Global stock markets have wiped out $11 trillion in assets in just 5 weeks, which could send global stock markets into a bear market. While it certainly seems tempting to buy the dip, investors should now be on guard. The major U.S. equity markets, however, have already begun a downward trend since the beginning of the year. The S&P 500 has already lost 15.57% for the year, the DOW 11.40%, and the NASDAQ a whopping 24.5%. The NASDAQ’s descent has caught many investors cold, like tech. Stocks are very popular with many, especially small investors.
DOW Jones Industrial Average
With the U.S. stock markets leading the way, markets in Europe have also gone down. Germany’s DAX is down -11.69% year over year. In France, the picture is the same, with the CAC 40 standing at -11.05% year-over-year and the STOXX at -11.30%. Only the FTSE100 in the UK is able to hold its ground with +0.46%.
With falling stock indices, the stock market seems more attractive again for many, but you should not go into panic buying now. The global signs are still in a downward trend because the central banks want to turn off the money tap and raise interest rates. In addition, the war in Ukraine continues to be fraught with uncertainty and shows no signs of improvement so far. Not to mention global inflation, which is having a negative impact on purchasing power, certainly prompting one or the other to prefer investing in safe havens rather than risky stocks.
Rising inflation is primarily due to central banks printing currencies, devaluing global fiat currencies, and thus reducing purchasing power relative to real goods. Ironically, it is fiat currencies that are seen as safe havens by investors. The U.S. dollar, for example, is considered a safe haven by investors, and it is showing as we speak. A look at the chart of the U.S. dollar index shows that it has risen by over 9% since the beginning of the year.
What may seem incomprehensible to some now actually sounds plausible. Investors will now position themselves to grab cheap assets once the crash has begun and the carnage is over. It is not for nothing that the best buys are made when the crash is over and the panic has subsided.