It is known to many investors (old and new) that Dow Jones Industrial Average is simply a stock market index. The Dow Jones Industrial Average is also referred informally to as Dow, and it is based on thirty large public trading companies at any one trading day. The word Dow Stock is regularly used by the media and the investors to mean the overview health of the whole stock market. This article is about the reason for the fall of Dow Jones Industrial Average.
The 4th of December 2018 was marked by a drop down of the Dow Jones Industrial Average and an assertive market sell-off diminished all the hope for a comeback. The day before had seen a moderate stock bounce back, and the investors were wondering on why the Dow Jones Industrial Average fell the day after. Sometime prior to the occurrence of this situation, the White House had announced an interim truce between the two trade hostilities; China and the United States (US). Nonetheless, the American government has flickered on offering solid information showing the concessions that China made during the G-20 summit, after the truce was announced.
The US decided to hesitate on the warning they had issued to China regarding raising the tariffs on their products. Still, judging on the statements issued by the delegates of the two countries, little was agreed on during that meeting. What succeeded was a disorder caused by the Trump administration and the White House advisor giving out dissimilar statements on when the hold on tariffs would commence. The differences prompted the investors to think about if the two countries will ever work well together soon. The investor’s confidence has reduced for that reason, and marketers are very anxious about a recession looming large.
During the same period the yields of ten-year Treasury bonds went down to the decreased by the largest amount seen in a decade. It has been a usual experience for the 10-year Treasury bonds yield to rise and fall, but investors are worried this time around because it made the bond yield curve to fallen out. This shows that there will be an increase in the two-year bonds yields and a decrease in the yield of the ten-year bond. It also usually hints that inflation and betting interest rates of investors will go down for the next ten years. These are signs of a recession because they are considered default financial atmosphere.
In the end, the stock market usually does not go into a phase of competitive sale-off until the yield curve rebounds. This implies that the ten-year Treasury bond yields drop below those of two-year bonds.