Apr 2, 2018
Why Did the Market Drop (Again)? Trump, Tariffs, and Tech
Three words: Trump, tariffs, and tech. Here’s how to cope when markets are unpredictable.
What happened to markets today? We can sum it up in three words: Trump, tariffs, and tech stocks.
The Dow Jones Industrial Average fell 700 points by mid-afternoon. Meanwhile, two other key indexes the S and P 500 and the tech-heavy Nasdaq fell 3.1% and 3.5% respectively.
It’s the third time this year that major indexes have experienced steep drops in a single day.
FANG companies got declawed
Stocks of the so-called FANG companies–Facebook, Amazon, Netflix, and Google–were among the hardest hit. Collectively, those companies have lost $324 billion over the last two weeks, according to reports. But it wasn’t just the large market leaders in tech, companies including social media app Snapchat also suffered losses.
Facebook has been facing pressure following news that it leaked personal data from 50 million users to a firm called Cambridge Analytica, which reportedly gathered the information to create psychological profiles of voters during the 2016 elections, without user permission.
Similarly, Amazon has been the subject of President Trump’s wrath in recent days, as the president has made erroneous claims on Twitter about the company’s tax filing status and use of the U.S. Postal Service for parcel deliveries. While the online retailer has been having a tough day, until recently its stock has been up more than 50% in the past year, according to Bloomberg.
And in related news, chip maker Intel, which provides microchips to some of the largest tech companies around, experienced a steep sell off, after news reports said Apple would switch from Intel chips to microprocessors it manufactures itself, by 2020.
Apple is reportedly one of Intel’s biggest sources of revenue.
Is it “Groundhog Day?”
There have been two other stock big sell-offs over the past few months. In February, for example, fears about inflation led to the steepest decline markets had experienced in more than a year.
Stocks of the so-called FANG companies–Facebook, Amazon, Netflix, and Google–were among the hardest hit.
And in late March, fears about a trade war with China sparked a smaller sell-off in the major indexes. On Monday, China announced it would hit back against $60 billion of U.S. tariffs on its own products, with tariffs on 128 U.S. products, including farm and agricultural exports.
Good to know: April is the beginning of the second quarter, which means earnings are due for most public companies for their first quarter. Many of the leading tech companies are expected to report strong earnings, according to some market analysts.
Is this kind of volatility normal?
Yup. Volatility is considered a normal part of market behavior–and corrections aren’t all that unusual.
In fact, according to some experts, volatility tends to appear in markets in clusters. That means large market swings tend to follow each other, just as small market movements do.
Things to think about when markets go down
Keep on investing small amounts of money on a regular basis into your diversified Stash portfolio. You’ll automatically capture market highs and purchase more of your investment when it dips.
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