Current Stock Market Events Overview: Price Crash? No Need to Panic Sell

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Written By Rivera Claudia

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Investors have not been able to go wrong with a global equity ETF in recent years, as prices have been rising steadily. Even the price fluctuations that are inevitable on the stock markets have been kept within narrow limits when comparing the years after the turn of the millennium or the financial crisis of 2008 onwards. The exception was the Corona crash in spring 2020, which was recovered from within a short time. It is not entirely clear whether the current stock market turmoil will turn out to be another episode or whether it will initiate a trend reversal.

Stock market prices fluctuate more

The fact is that so-called volatility as an indicator of price fluctuations has increased significantly. This is most evident in Japan, where the Nikkei 225 index fell by more than 12% on August 5, 2024. From the perspective of euro investors, it was still more than 10%. However, the index accounted for a large part of the losses the following day. There are currently unusually violent fluctuations in most other stock markets, which, while a delight for so-called day traders, are disturbing for ordinary investors.

MSCI World, Nikkei and Dax in the return check

The price declines so far have been anything but dramatic – especially for long-term investors who rely exclusively or mainly on broadly diversified global equity ETFs. Our benchmark index, the MSCI World, is still clearly in positive territory for the year. Even the Nikkei 225, which has fallen recently, has still produced a positive return over this period. The same applies to the leading German index Dax.

With our daily updated charts, you can continuously track the performance of all three indices. By clicking on the legend label below, you can also select just one or two index curves for better clarity.

Excellent long-term returns

A look at the long-term performance of the three indices, which we also update daily, shows how much patience pays off when investing. The double-digit returns that the MSCI World has achieved over five and ten years are evidence of extremely good times in the stock market. Over the very long term, investors should expect a return of around 7 to 8 percent per year for broadly diversified equity investments. This is also a generous premium for the risk you take with this type of investment.

How to correctly classify price losses

Our loss analysis is particularly useful for those who do not have much experience with stock investing. It allows current losses to be placed in a long-term context. When you look at the long-term loss chart of the global stock market, you can immediately see that there is currently no reason to panic. In the chart, we show the respective price drops based on the previously reached highs. If the line passes through the top of the chart, the x-axis, the market is moving towards its highest level.

Three things are clearly visible:

  • How often has the index fallen in the past?
  • How long did the losing streaks last?
  • What was the lowest the index could fall?

The last point is particularly interesting for investors in the current frenzy. You can easily compare the recent downward swing with previous declines. At 9% below its previous high, the MSCI World on August 5, 2024, was still far from the losses of past crises.

Crises offer opportunities for flip-flop investors

Investors who follow our principle Flip flops portfolios Following this, you can remain calm when prices fall. For them, large falls in the stock market are an opportunity for countercyclical reallocation. Following the motto “When others leave, we enter”, money is withdrawn from the bond module and invested in the stock market as soon as the share of stocks in the portfolio becomes too small. We explain exactly how this works in the article “The Flip-Flop Portfolio – Invest Conveniently and Successfully”.

Overview of current stock market events
Price Collapse? No Need to Panic Sell

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Tech stocks come under pressure

In addition to the three stock indices presented here, we offer many other tables and charts in the premium area in which the returns and risks of the stock markets of all industrialized and emerging countries are analyzed. There you will also find a detailed comparison of the returns of the most important industrial sectors and investment styles. It is noticeable that the IT sector is much more affected by the current turmoil than the stock market as a whole. This is not surprising, because Apple, Microsoft, Nvidia and Co have performed excellently in recent years, which has only been slightly diminished by the recent losses. When it comes to strategies, the particularly successful trend following (momentum) strategy was hit particularly hard, while the low volatility strategy suffered the least.

Tip: If you’re interested in the daily current figures from the MSCI World Index – we’ve got everything you need to know about the global stock market barometer in a comprehensive analysis with 60 graphs and tables compiled for you.

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