Investors who were hoping that the volatility of quarter one was behind them have been left sadly disappointed as tariff tensions and tech turmoil saw US markets tumble, the VIX soar, the S&P fall below technical levels to five-month lows and European markets start April lower.
The slight relief is that US markets bounced off yesterday’s lows into the close and futures are pointing to a positive session in the US today, which means the falls and associated contagion have been moderated.
However, with the traditional safe havens failing to live up to their billing, there are limited places to hide and the question that investors need to work out is what next for markets?
Is this the beginning of a bear market, or simply a revaluation of markets which had gotten ahead of themselves, but which have inherent upside through tax cuts, deregulation and growth in corporate profitability?
The major fear for markets is that the imposition of retaliatory import tariffs by China could just be the tip of the iceberg and will cause a chain reaction that drags more sectors and countries into the dispute.
In a world where China is not willing to turn the other cheek and where President Trump likes to get the last word, the situation is set for further turmoil and the danger for investors is that this will escalate into a broader battle, which could leave few sectors immune to trouble.
Each of the major tech companies appears to have its own particular set of problems to deal with. Facebook (FB) – data security. Intel (INTC) – Apple (AAPL) chips. Tesla (TSLA) – missed targets compounding fears of excessive leverage. Amazon (AMZN) – President Trump.
However, the one thing these companies do have in common is that these stocks are held by most of the big popular global funds. This means that many investors may have substantial exposure, even if they are not direct shareholders, which makes the tech troubles a wider problem.
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