Dow Jones Delivers ZERO Quarterly Return as Stock Market Flatlines

Journalist:
Ben Brown
September 30, 2019

The stock market delivered a big, fat zero in the third quarter despite some huge financial and political earthquakes. The Dow Jones is set to end Q3 flat, with less than 100 points to show for three months of trading.

The quarter from July to September kicked off with recession fears and ended with the launch of a historic impeachment inquiry into the US president. A broader stock market plunge was arguably only prevented by two historic interest rate cuts by the Federal Reserve.

Despite some wild swings, the Dow Jones Industrial Average (DJIA) ended Q3 less than 100 points higher than when it started. | Source: TradingView

The real miracle is that the Dow held on at all. Here’s what you missed.

Q3: Recession fears and central bank action

July was dominated by talks of recession, triggered by the inverted yield curve. The ten-year Treasury bond yield dipped below the two-year for the first time since the last financial crisis. The classic recession indicator caused panic on the Dow Jones and triggered the worst trading day of 2019 so far.

The Federal Reserve stepped in to halt the bleeding, delivering the first interest rate cut in ten years. Chairman Powell cut again in September, pulling the target base rate to 1.75% – 2%.

The Federal Reserve cut the target base interest rate cut twice in Q3 for the first time in a decade. | Source: TradinEconomics / Federal Reserve

In Europe, the European Central Bank cut deeper into negative territory, slicing the base rate down to negative 0.5%. Meanwhile, German manufacturing went into contraction.

Trade war fears shook the Dow

The US-China trade war continued to weigh on investor sentiment through Q3. China delivered a gut punch in early August as it “weaponized” the yuan, letting it fall beyond the psychological level of $7. It was seen by Dow traders as a deliberate retaliatory move by the Chinese.

Ongoing protests in Hong Kong added to global macro worries as protestors stormed and shut down the city’s airport.

Oil and repo markets rocked

Outside the Dow Jones and broader stock market, we saw the biggest intraday jump on record for the oil price. A drone attack hit a Saudi Arabian oil facility in mid-September, instantly cutting 5% global oil supply.

And if that wasn’t enough, we saw a mini panic in the bank’s overnight lending market which saw the New York Federal Reserve repeatedly inject $75 billion to prevent a liquidity crisis.

What next for the Dow Jones?

Despite a turbulent news cycle, the Dow ended Q3 flat. So what’s next?

Well, there’s plenty of bearish talk out there. Wall Street firms and insiders are selling equities at a rapid pace. Infamous ‘Big Short’ trader Michael Bury sees a huge bubble in the passive investment market, driven by Dow Jones and S&P 500 exchange-traded funds (ETFs).

On the flip side, Bill Gates is still bullish as hell. One thing’s for the sure, the next three months are likely to be just as chaotic as the last.

Click here for a live Dow Jones Industrial Average chart.

This article was edited by Samburaj Das.

Last modified (UTC): September 30, 2019 13:28

Ben Brown

Ben is a journalist with a decade of experience covering financial markets. Based in London, UK, his writing has appeared in The Huffington Post and he was Chief Editor at Block Explorer, the world's longest-running source of Blockchain data. Reach him at benjamin-brown.uk or on Twitter at _Ben_Brown. Email ben @ benjamin-brown.uk.