The stock market often moves in mysterious ways, but recently it appears to have developed stress fractures that could indicate a harder weather ahead. The signs of market strain are on display from Wall Street to Main Street, where traders and investors are nervously awaiting the next downturn.
Recent weeks have seen a sharp sell-off in the markets, with major indices around the world having seen drops of up to 15%. This has created a climate of fear as traders and investors fret about the possibility of further losses and the risks associated with them.
While some analysts are predicting a market crash, many are saying that there are no clear breaks, just a build up of stress fractures that could eventually be the cause of an eventual market crash.
The causes of the market stress are numerous, ranging from geopolitical concerns surrounding the upcoming U.S. presidential election, to the ongoing UK-EU negotiations, and economic concerns around COVID-19. These issues are all contributing to the fragility of markets, and could be enough to cause a crash if the conditions are right.
So far, market experts are playing down the risks of a crash, and instead pointing to longer-term signs of positive market performance. For example, certain sectors have been able to withstand the recent downturn, and the S&P 500 is still up around 35% from its lows last March.
The question is, will these stress fractures deepen and lead to a full-blown crash, or will they dissipate and lead to a positive performance in the markets? Only time will tell, but the possibility of both scenarios is certainly giving investors and traders alike pause for thought.