Stock markets taking a tumble…

02dow

Recently the stockmarkets have been taking quite a hard blow. Last week the DJIA fell ~360 points in one day, the biggest drop since November 2011.

Why are stockmarkets falling?
Investors cashing-in: The stockmarkets have seen tremendous gains since the beginning of 2013 and one reason for the current fall is that investors have reached/exceeded their short-term targets and are cashing-in their earnings. As investors begin to do this downwards momentum generates and can cause a mini-spiral downwards. The good news, if this is the main reason, would be that fundamentals remain pretty strong and that this is only a short-term blip.

QE announcements: Last week Ben Bernanke gave a press conference, which placed emphasis on the Fed tapering their QE program (read about it in my previous blog). The idea of QE being removed, considering the effects it has on bolstering the stockmarket, has spooked some investors helping cause a sell-off.

China: China has been struggling recently to maintain its strong economic growth and there are also rumours of a potential credit crunch, which will not only damage emerging economies around China but also harm developed economies, such as the US and Australia, helping fuel a bearish mentality.

Anything I haven’t mentioned that you think might be affecting the stockmarket? Tweet me on @Breadeconomics

-Ed

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