“Even though a single-day spike in volatility and little pullback in the stocks isn’t too alarming, investors are paying a very close attention as they try to figure out where the top of the market is,” said Bruce Bittles, chief investment strategist at Robert W Baird, said by phone.
As usual, tech shares bore the worst of the selling as investors exited this year’s best-performing group. The Nasdaq 100 Index sank 1.5 percent Thursday while the FANG block of tech giants, including Facebook, Amazon.com, Netflix and Google, tumbled 2.4 percent.
To Michael Shaoul, chief executive officer of Marketfield Asset Management, the rout is unlikely to escalate as global economic growth is strengthening, central banks continue to be accommodative and corporate America stays healthy. Despite this week’s earnings disappointments, S&P 500 profits are on course for the back-to-back 10 percent growth for the first time since 2011.
Other than dreading August, does the past hold any clues? Investors might look to the 1962 episode of Cuban missile crisis for an idea of the potential shock to equities should tensions between North Korea and the U.S. escalate, according to Michael Purves, chief global strategist and head of derivatives research at Weeden. During those two weeks when the prospect of a nuclear war grew, the S&P 500 Index’s 30-day volatility almost doubled.
“The brief decline by global markets is a reasonably measured response to the cross continent saber-rattling, but not in itself indicative of a meaningful change in the overall mood of markets,” Shaoul said. “It remains possible that we will see another brief lurch downwards, particularly in the technology sector that seems to be the locus of hedging activity, but the chances of this developing into a meaningful correction still looks remote at the current time.”
This article was provided by Bloomberg News.