If you are an investor, even if you are only starting, you may have heard about Dow Jones Industrial Average, which is a stock market index. Still named Dow, this Dow Jones Industrial Average is established on thirty large public trading companies on any given 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 paper will explain why the Dow Jones Industrial Average is down today.
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. Investors were left baffled on how the Dow Jones Industrial Average went down the day that succeeded a modest stock turn around. 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 followed was confusion with the Trump administration and the White House economic advisor issuing out contrasting statements on when the hold on tariffs would begin. The discrepancies made investors ponder if there will be harmony between the two countries in the near future. 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 was not the first time the ten-year Treasury bonds yields fluctuated, but investors are concerned by the current drop since it resulted to the flattening out of the bond yield curve. This means that the yields of two-year bonds and the ten-year bonds will fall. In addition, it highlights that both inflation and rates of betting interests will drop for the following ten years. These are warnings of a recession because they define the default financial atmosphere in such cases.
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.