Retailers Like Target May Face 2008 Level Sell-Off, US Stock Market in Deep Trouble?

Target and Tiffany are among the largest retailers in the U.S. stock market that are reportedly at risk of facing a 2008-level sell-off in the months to come.

On average, 95 of the largest retailers in the global market listed on the S&P Index fell by around 17 percent in the past three months, with Target, the eighth-largest department store in the U.S., falling by more than 26.5 percent within a one-month span.

target december 18
Stock price of Target in the past six months, data provided by Google Finance

Tiffany, a leading luxury goods retailer, has dropped more than 36 percent of its valuation this quarter amidst instability in the U.S. stock market and uncertainty over the trade-war between China and the U.S.

Stock Market in Trouble

With an additional two percent drop by the Dow Jones on the day, many analysts have recommended traders to refrain from entering short or long positions in the stock market in such a high volatile period.

According to Morgan Stanley Investment Management senior portfolio manager Andrew Slimmon, traders are uneasy investing in a market that is easily swayed political discussions that often occur during the weekend when markets are closed.

Slimmon said:

“We have a political machine that’s able to communicate any time of the day. Who wants to take the risk that something comes up and you’re long?”

Retailers, both the behemoths like Walmart and niche luxury goods distributors like Tiffany are experiencing an intensified sell-off because of the uncertainty in the long-term outlook on the industry.

The rise of Amazon, Alibaba, and other popular e-commerce platforms in the U.S., Europe, and Asia have led investors to be concerned about the relevance of physical stores, malls, and department stores in the modern era of digital commerce.

Instinet analyst Simeon Siegel told FT:

“People went from saying the mall is dead to the mall is back with a vengeance. The reality is that it never died — but it was also never as healthy as people thought.”

As Christmas nears, an increasing number of consumers are expected to visit malls and department stores to spend before the holiday season and the new year. The gradual increase in traffic at malls have allowed retailers to minimize their losses in the stock market to a certain extent.

Still, in a period during which even strong stocks like Amazon are falling by over 20 percent on a quarterly basis, the future of the global stock and financial market remains unpredictable.

Several analysts believe if the trend of the U.S. market continues throughout the upcoming months, it could leave the market vulnerable to a 2008-level sell-off. As of December, there exists no strong evidence to confirm that another large correction is imminent in the mid-term.

Worse in Asia

The economy of China has worsened over the past two months, as the U.S. and China have struggled to establish a signed trade agreement to ease the burden on both markets.

As China’s economy weakened, South Korea, Japan, Hong Kong, and other regions have started to decline as well, mirroring the state of the U.S. stock market.

Featured image from Shutterstock.

Last modified (UTC): December 18, 2018 6:23 AM

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Joseph Young

Hong Kong-Based Finance and Cryptocurrency Analyst. Contributing regularly to CCN and Hacked. Providing unique insights into the crypto and fintech space since 2012.