The Nasdaq is in a bear market. On December 23, the Nasdaq Composite fell to a new yearly low at 6,332 points, as stocks and securities listed on the exchange plummeted in value.
A bear market is commonly referred to as a 20 percent drop from a market, index, or asset’s all-time high. Since its newly established all-time high on August 29 at 8,109 points, the Nasdaq Composite has fallen by nearly 22 percent to 6,332 points.
As technology stocks in the likes of Amazon and Cisco recorded a daily drop of 3 to 6 percent on the day, the Nasdaq Composite struggled to sustain any sort of momentum and dropped by 3 percent within a six-hour span.
The U.S. government and the Trump administration have attributed the poor performance of the U.S. stock market to the latest rate hike by the Federal Reserve.
The increase in the federal funds rate has made it more costly for businesses, especially small to medium businesses, to lend money from financial institutions, placing more pressure on the struggling economy of the U.S.
Jeff Kravetz, a regional investment director at U.S. Bank Wealth Management, said that the Fed believes the economy of the U.S. is still strong. But, the country’s central bank has failed to consider key variables that may affect the short-term prospect of the global economy including the tension between the U.S. and China over the long-lasting trade war and high tariffs.
“The Fed is making the case the economy is still good, but there’s so many things investors are worried about,” Kravetz said.
Although several analysts have claimed that the Fed cannot alter the rate purely based on the performance of the U.S. stock market, such an argument was relevant prior to decline in the Nasdaq Composite and the Dow Jones.
Both the Nasdaq Composite and the Dow Jones are up quite significantly from early 2017. However, with about a week of trading left before the year’s end, if the sell-pressure on the U.S. stock market continues to grow and it does not demonstrate signs of a drastic trend reversal, an additional drop in value can be expected throughout December and the first month of 2019.
UBS Global Wealth Management executive Jason Draho told the WSJ that investors in the stock market are refraining from initiating in any investment until the year’s end, and without buy volumes, the intensifying sell pressure could lead to a steeper sell-off for U.S. markets.
The fear of slowing growth and a bear market has become much more prominent. There’s not many buyers who want to step up and say they’re willing to buy today, and many are waiting for the new year.
The Dow Jones has dropped by 16.3 percent from its all-time high at 26,828 points and is approaching bear market territory.
On the day, the Dow Jones recorded a 1.81 percent drop, ending the week as the market’s worst week since the 2008 financial crisis.
Last modified: May 20, 2020 1:20 PM UTC