What’s happening on the stock market?
In addition to the US jobs market, which is causing concern, the announcement of disappointing quarterly results from technology giants such as Amazon and Intel has caused share prices in a sector that has become very influential on the US stock market to plummet.
So while the broad-based S&P 500 index fell 1.8% to 5,346 points on Friday, the tech-heavy NASDAQ index plunged 2.4%, extending its loss of value to 10% since its record high in mid-July.
In Canada, the S&P/TSX index also fell by 2.1% to 22,227 points, suffering the full force of fears of a negative impact of a sharp slowdown in the American economy on the major sectors of the TSX: energy, resources and financial services.
Earlier, across the Atlantic, the European stock market index Stoxx 600 had fallen by 2.7% (-2.3% in Frankfurt, -1.3% in London).
And in Asia, the Tokyo and Hong Kong stock markets fell by 5.8% and 2%, respectively.
What are the explanations?
“Stock markets are at a crossroads, hesitating between a soft or hard landing for the American economy, after its period of overheating and high inflation post-COVID-19,” summarized Sacha Hédelin, portfolio manager at the European firm Amplegest, quoted by Agence France-Presse.
In fact, fears of a recession in the United States had resurfaced on Thursday after the announcement of a sharp deterioration in manufacturing activity.
On Friday, recession fears were heightened by lower-than-expected July employment figures: the unemployment rate was 4.3% instead of the anticipated 4.2%, and only 114,000 jobs were created in July compared to the 185,000 anticipated and the 179,000 measured a month earlier.
In response to these indicators, investors are being encouraged to shun stocks whose value depends on the profits of companies that risk being affected by a sharp slowdown in the American economy.
What to do among small investors?
In the immediate future? Above all, nothing impulsive or reactive in the short term, according to the general opinion of investment management professionals.
During such episodes of stock market decline, they strongly advise small investors not to give in to the temptation to intervene quickly in a portfolio whose investment objectives and strategy are already well established.
“Although investors may be concerned about the risk of a recession in the United States, due to an undue extension of high interest rates by the American Federal Reserve [Fed]”A few short-term data blips should not cause investors to overreact,” Lara Castleton, director of investment strategy at London-based Janus Henderson Investors (US$360 billion in assets under management), told The Associated Press in an interview.
In fact, according to Mme Castleton said, “Stock selling episodes should be considered relatively normal in the stock market, especially given the high valuations in many sectors of the stock market. It’s also a good reminder for investors to focus on the outlook for future corporate earnings.”