5 Sept 2021
Investors Concerned of Impending Market Crash as Stocks Hit Highs
The Index Today
After several months of gains and highs, investors are beginning to safeguard their stocks from potential market turmoil. Utilities, real estate and healthcare in the S&P 500 have turned out to be some of the best performing sectors, with utilities ranking as the best with a recorded growth of 10.2%
Investors are expecting to see a drop in stocks in the coming weeks or months. The financial market reflected a gap in price from the front month Cboe volatility Index Futures contact and the VIX index, making it higher for around 85% of the time in the last five years.
Surprisingly, safe haven currencies such as the Japanese yen and the Swiss franc managed to surpass expected performance compared to G10 currencies. Head of Global Equities at money manager Nuveen investments said, “It’s been a year of positive market returns, but it’s a bull market which has pretty defensive undertones.”
During the post-pandemic rise, investors have been left worried at the constant demand for downside protection. Extremely low yields on fixed income have left little to none alternatives to equities. It is important to note here that betting against stocks has proved to be disastrous in the past eighteen months.
However, on Friday, the S&P seemed unaffected with the employment data release. A few market participants bet that a weaker economy could weaken the Federal Reserve and its plan to undo its easy money policies in the upcoming months. David Grecsek, managing director and partner at Aspiriant stated, “It’s been a wonderful ride for U.S equities, but moving forward we think it is going to be a little bit of a different picture.” With increasing concerns of the stock market volatility, Grecsek has prompted to shift money to non-US stocks and emerging markets.
The upcoming U.S August producer price index data will give investors some clues regarding inflation as July showed the highest increase in the last ten years. The Delta variant is another factor which is expected to affect growth which is pushing investors to go for defensive sectors to protect themselves from a market crash.