Panic on the stock markets primarily affected technology companies, but fortunately it doesn't yet seem like a global crisis.
Significant world stock exchanges have been weakened in recent days by an explosive cocktail that resulted in one of the worst days in the history of stock markets. Asian markets suffered the most, but the United States was certainly not left out. On the contrary, Europe reports a calmer situation. For many investors, this can also be a challenge to look for new investments.
World stock indexes are dominated by enormous panic. The main reason is fears of a possible recession in the United States. That's where statisticians have published the worst results from the industry over the past year. Moreover, the US job market has weakened the most since the end of 2021. On top of that, investors are concerned that the artificial intelligence bubble is about to burst. Analysts also point to increasing geopolitical tensions due to a possible conflict between Israel and Iran.
Steep fall
US stocks saw a sharp drop at the beginning of August. The sell-off was primarily driven by technology stocks, such as chip maker Nvidia and brands like Apple, Microsoft, Alphabet, Amazon, Meta, and Tesla. Due to this, the S&P 500 index fell by three percent immediately, which was also the sharpest drop since 2022.
Bitcoin also fell into free fall, initially losing almost 14 percent. This confirmed critics' claims that this cryptocurrency is definitely not a guarantee of low risk or high profitability.
The crisis had an even greater impact on Asian markets. The main Japanese index Nikkei initially lost over 12 percent and thus experienced the worst day since 1987. The seriousness of the situation was underscored by the fact that the Japanese currency had hitherto been a safe haven, much like gold for example. The Korean Kospi then fell by almost 10 percent. Even so, its trading had to be temporarily halted.
Billionaire Warren Buffett's company, Berkshire Hathaway, certainly didn't help the bad mood when it sold half of its Apple shares. It showed that the securities of this well-known brand may not be as prospective as was expected just a few weeks ago.
And even though the situation calmed down a bit later, there are still signs of uncertainty reflecting in the volatility of some markets.
Peaceful Europe and future development
Europe itself, however, was affected by this shock much less than it was across the ocean. The main stock indices here wrote off between 2 and 3 percent. The old continent may also benefit from the absence of tech giants, adding the argument that European indices may deliver better performance in the coming weeks than their American counterparts.
So what impact can this have in the future? Most of the experts we approached rather urge calm.
"It needs to be said that fears of a recession in the United States are not entirely in place. Stock markets are not the same as the economy. The gross domestic product there grew by 2.8 percent in the second quarter. No Western country is approaching such a pace. Despite the rise in unemployment, American consumers are also in good shape. Retail sales there have been growing continuously month by month since February. The role of the central bank is to maintain inflation at its target, not to maintain stock indices at high values. The current panic is thus quite exaggerated,"
Purple Trading broker company analyst Petr Lajsek told LP-Life.
Portfolio manager of the Conseq company Martin Pavlík also advises to keep a cool head.
"If the markets calm down, we can expect that European markets will quickly erase some of the losses. This is due to attractive equity value indicators, better economic momentum, relatively strong households, and a relaxed monetary policy of the European Central Bank,"
this expert wrote to the editorial office and added:
"Europe has been going through economic stagnation for several quarters, with the current momentum being slightly positive. In the United States, it's the opposite. Thus, unless America falls into a deeper recession, we in the Czech Republic shouldn't feel negative tendencies for the time being."
"The Brent crude barrel has reached its lowest levels of the year due to concerns about the American economy. Thus, fuel prices will continue to fall in our country. This will be appreciated not only by households but also by transporters and businesses,"
Lajsek is once again convinced.
The threat remains on the table
In America, however, we can expect interest rates to fall.
"The Federal Reserve will be forced to rapidly lower its interest rates in the coming months. In September, the market now sees it more likely to result in a jumbo-cut of 50 basis points rather than a standard cut of 25 points. By the end of the year, the base interest rate in the US should have fallen by more than 100 points. For American stocks, the reduction in interest rates should theoretically be good news, but the prevailing view is that the Fed will be forced to reduce due to circumstances, especially the serious looming or even already beginning recession. The market is now afraid that the situation has gotten out of the Fed's control, and the previous soft landing outlook is taken away. The hard landing threat is back on the table,"
Lukáš Kovanda from Trinity Bank is speculating on his personal website.
So, what advice to give those who are investing? Those who have a long-term portfolio definitely should not panic. You always need to keep your goal in mind. Not for nothing it is said that "when there is blood in the streets, one must buy". Although sell-offs may continue, for selected stocks, however, this could create new interesting opportunities.
Sources: CTK, website of Lukas Kovanda, own questioning
