CNBC financial columnist Lawrence Lewitinn wrote today that the global financial market has been turbulent recently, and the U.S. stock market has also experienced a continuous decline, giving people the smell of the 1998 financial crisis, when the U.S. stock market plummeted by more than 20% in three months. , but closed up sharply that year, which shows that although the US stock market will be affected by the global financial market in the short term, the long-term upward trend will remain unchanged, and how it will fall will rise back up. Investors do not need to panic, falling is a good opportunity to buy.
Oil prices plummeted, the U.S. job market continued to pick up, the U.S. stock market was at a record high, and the stock markets, bond markets, and foreign exchange markets of emerging market countries led by Russia fell across the board.
The Russian ruble fell below 64 to the dollar for the first time in history on Monday, Venezuelan bonds fell below 0.40 and Thai stocks suffered their biggest drop in 11 months. Brazil's corporate bond market has been volatile, weighed down by a corruption probe into state oil producer Petrobras.
All of this feels deja vu and reminds investors of 1998, when oil prices fell, pushing crude exporters like Russia and Venezuela into the abyss, emerging market currencies plummeted, Venezuela was in financial crisis, Russia It is involved in the dilemma of debt default and devaluation of the local currency. The current situation is so similar to 1998 that many traders shudder at the comparison, believing that a stormy wave in financial markets is coming.
Lewitinn pointed out that although the U.S. stock market finally closed higher in 1998, with the S&P 500 rising 27%, the trend was ups and downs, and the S&P plunged 20% that summer.
In 98, U.S. stocks plummeted but ended sharply higher
Mark Newton, chief technical analyst at Greywolf Execution Partners, pointed out that people should not compare this year to the trend of financial markets in 1998. Despite investors' fear, U.S. stocks are still quite Strong, only 4 points off the highs, and a violent rally today, the S&P 500 tumbled 22% between July and October 1998.
Although this year isn't too comparable to 1998, Newton thinks investors can learn some lessons from the U.S. stock market's summer slump in '98.
The summer slump in 1998 tells people that the turmoil in the global financial market will only temporarily affect the trend of US stocks. At the end of 1998, US stocks not only recovered all lost ground but also hit new highs. Although US stocks fell sharply in 1998, they successfully held the long-term trend line. , the stock market's brief tumble turned out to be an excellent buying opportunity for investors.
Despite the recent panic in the market, Newton sees today's violent rally as an end to the recent decline.
The S&P 500 rebounded strongly after approaching the 50% retracement level
He noticed that the S&P 500 index was close to the 1950 line, approaching the 50% retracement level of the band gain from October 15th to December 5th, the S&P 500 The index rose 40 points around this point today, up 2.03%, which means that the decline has come to an end. Even if there is another adjustment in the future, the market will end the adjustment in the short term and resume the upward trend.
Newton points out that unless the S&P 500 falls by more than 150 points in the future and breaks through a long-term uptrend line, investors need not worry about the broader market at all.
The S&P 500 has not broken below the long-term uptrend line
The S&P 500 has to fall below at least 1820 points to be defined as panic selling, and it is only a short-term adjustment on the way up, and investors should buy dips intervention.
But there are still many investors who believe that there is systemic risk in the market, and they are holding the currency on the sidelines. Chad Morganlander, fund manager at
Washington Crossing Advisors, pointed out that there are many leveraged instruments in the market, and all kinds of assets are slightly overvalued in the context of a significant slowdown in the global economy.
He is changing positions and shares to switch to defensive mode, focusing on the configuration of higher safety factorsBlue-chip stocks, the position is neutral. Morganlander said he would consider buying stocks after a 10% to 12% correction in the S&P 500.