Wall Street in Red: Risk Aversion Resurfaces

Wall Street in Red: Risk Aversion Resurfaces

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After a long weekend, Wall Street has returned Tuesday with the decline. Risk appetite, which allowed a sharp rebound early this year, now seems somewhat alleviated. Investors are caught by doubts about global growth, especially in China, after a further downward revision by the IMF of global growth prospects. The “shutdown” of part of the US administration, which is entering its second month, is now threatening to weigh on activity in the United States, while in Europe, the uncertainties on Brexit and the slowdown in German economy are also worrying.

At the close, the Dow Jones index dropped 1.22% on Tuesday at 24,405 points, while the S&P fell by 1.42% to 2,632 pts, and the composite Nasdaq index fell 1.91% to 7,020 pts. Nearly all S & P 500 sector indices suffered declines on Tuesday, led by energy (-2.1%) and technology (-1.9%).

After a start of the year marked by hopes of trade agreement between the United States and China, as well as a rebound in tech stocks after the plunge in December, investors are now more cautious. In particular, they were threatened by the release of China’s GDP in the fourth quarter and complete 2018, which confirmed a sharp slowdown in growth.

The deceleration was continuous throughout the year in China: the increase in GDP was + 6.4% in the 4th quarter at an annual rate, after +6.8% in 1st quarter, +6.7% in the 2nd and +6.5% in the 3rd. For the year as a whole, it stands at 6.6%, its slowest pace in 28 years.

Even though Beijing has already announced measures to support its economy, the slowdown will continue in 2019, and could increase if no trade agreement is finally reached with the United States.

On the eve of the opening of the World Economic Forum in Davos on Monday, the IMF has revised down its global economic growth forecast for the second time since last October. The increase in world GDP would thus be limited to 3.5% this year, instead of the 3.7% projected in October, and 3.9% previously. For 2020, growth is expected to remain at 3.6% against 3.7%.

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I handle much of news coverage for tech stocks, and occasionally cover companies in different sectors. In the past, I've written for other financial sites and published independent investment research, primarily on tech companies. I have a B.A. in Economics from Columbia University. I'm based out of San Diego, but grew up in Southern New Jersey. I play basketball and tennis in my spare time, am a long-time (and long-suffering) fan of Philadelphia's sports teams, and alternate daily between using an iPad Air, a Galaxy Note 3, and one or two Windows PCs.

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