Stocks Continue Downward Spiral on News About Possible Global Recession

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It has been a wild week for the stock market and it is only Wednesday.

After news out of China sent stocks tumbling on Monday, Tuesday offered a day of relief for investors looking for stabilization. However, this time of respite was short-lived. On Wednesday, the Dow started the trading day in a downward spiral after Wall Street continues to take capital out of traditional stocks and direct it toward gold and US bonds.

The massive pullout has been ignited by the panic that escalating trade tensions between the US and China will have a significant impact on the global economy. The experts at Rabobank are now predicting that there will be a weak global recession because of the effects of the ongoing trade wars. The bank reduced its worldwide economic growth prediction by 3% on Wednesday, causing investors to pull back.

Although Monday’s markets turned in the worst performance of the year for Wall Street, Tuesday’s big rebound brought relief to investors. While the 10-year US government bond took a hit when the stock market opened, bonds and yields and gold soared. Prices of gold rose 1.8%, putting it ahead by 17% on the year.

Investors are looking at the bond market for an indicator of things to come. Overnight on Tuesday, the Reserve Bank of New Zealand, as well as the Reserve Bank of India, announced rate cuts that were more than had been expected. These cuts came on the heels of the US Federal Reserve slashing rates for the first time in one decade during its July 31 meeting. Edward Moya, a market analyst at Oanda, said that further rate cuts from the Fed could cause prices of gold to top out around $1,650.

Amidst the chaos, US President Donald Trump continues to use his Twitter account to weigh in on the yield curve and the Fed’s decision to not cut rates fast enough.

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