MoneyWhat’s Really Causing The Turbulence in Today’s Market?

Speculators are mainly focused on the recent happenings in the political arena, where Michael Cohen, President Trump’s former lawyer, admitted to eight criminal charges – including some violations in campaign-finance laws. This wasn’t the only event stirring up the news lately; Paul Manafort, President Trump’s campaign manager, is facing eight charges related to tax fraud. As midterm elections come around, analysts are worried that these mild shakeups might bring volatility into the market. Historically, the...
Arjun GangakhedkarAugust 24, 2018

Speculators are mainly focused on the recent happenings in the political arena, where Michael Cohen, President Trump’s former lawyer, admitted to eight criminal charges – including some violations in campaign-finance laws. This wasn’t the only event stirring up the news lately; Paul Manafort, President Trump’s campaign manager, is facing eight charges related to tax fraud.

As midterm elections come around, analysts are worried that these mild shakeups might bring volatility into the market. Historically, the economy hasn’t done very well under doubts and concerns of presidential jeopardy. Consider the stock market during the Watergate Scandal; when Archibald Cox, former Solicitor General of the U.S., was fired from the Administration and then-Attorney General Elliot Richardson resigned, the S&P 500 plummeted a staggering 14% in the course of two months.

Be assured, however, that the mild turbulence we’ve seen in the past week has done little in the markets. The S&P 500 on Wednesday closed a mere 1.14 points down to 2,861.82. Meanwhile, the Dow Jones Industrial Average fell 0.3%, resetting a four-day streak of gains. On the other hand, the NASDAQ Composite rose 0.4%.

As optimistic as this milestone is for the markets, let’s not celebrate so soon. Analysts are currently debating whether to wait until a new closing high is reached to truly announce that this is the longest bull run in history. Despite this caution, the markets hold promise; the S&P 500 is only 0.4% away from reaching its previous high in January.

In context, the nation’s unemployment rate is low while economic growth has been very healthy this year, with companies comforting investors with higher revenue and sales. Companies like Target and Lowe’s reported stronger sales and higher profits in their latest quarterly earnings reports. Crude oil prices rose by 3.1% on Wednesday, reflecting a strengthening energy sector.

In other news, investors are now being promised higher interest rates next month assuming that the economy grows at its current rate. The Federal Reserve has been concerned about a few potential threats lately, mostly revolving around international trade disputes and sanctions. Such events might have a negative effect on business investment, hiring, as well as consumer confidence and purchasing power. So far, however, there is nothing to worry about.

There are some questions, however, that emerge from these observations.

Where will these events lead us in the coming weeks?

How might the political shakeups develop and affect the markets?

Could trade disputes lighten up as we end the year?

Whatever may happen, we can be comforted by a growing economy that has already set a milestone in economic growth – and as we slowly approach the end of 2018, we can’t help but curiously look forward to the ups and downs we’ll see in the headlines.

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