While the holiday season is traditionally a festive period for families, friends and a good push for the economy and consuming power in general, the markets were exceptionally grim.
Across global markets, this month of December is the lowest since 1931. As a result, some experts predict a grim 2019 and some say there might be a high chance for a recession.
Some other specialists condemn the Federal Reserve’s decision and think that this might be a temporary low, while some political experts think that the shutdown of the American government might destabilize the markets even longer.
An exceptionally low performance
The last month of 2018 showed grim results. Standard and Poor’s index fell by 2.7%, thus marking the markets as being the lowest percentage change since 1931.
According to Dow Jones Market Data, the previous “largest decline in the index on the trading day before Christmas was Dec. 23 in 1933”, as MarketWatch reports.
Making a run for 1931. pic.twitter.com/QYbx7q9YId
— Bespoke (@bespokeinvest) December 24, 2018
Moreover, the Dow Jones Industrial Average also fell by 2.9% at 653 points, representing the worst performance for a pre-Christmas session since its creation.
While headlines are concerned about a new global recession – which could be even more destructive than the financial crash in 2008, some experts criticized the awkward public announcement of the Treasury Secretary.
An unstable Federal Reserve
On December 23rd, Steven Mnuchin who supported and confirmed the health of the markets on his Twitter account.
Secretary Mnuchin convened individual calls with the CEOs of the nation's six largest banks. See attached statement. pic.twitter.com/IEb2kv6dx9
— Treasury Department (@USTreasury) December 23, 2018
The post had the opposite effect as financial analysts starting raising questions about the liquidity. In order to justify this call, Treasury officials replied that calling banks was just part of a “routine checkup”.
Moreover, the Federal Reserve interest hikes as well as the American President criticizing the Reserve in a historical political breach in the country has hindered the trust banks and foreign capitals for the past few days.
It's Christmas Eve and @realDonaldTrump is plunging the country into chaos. The stock market is tanking and the president is waging a personal war on the Federal Reserve — after he just fired the Secretary of Defense. #TrumpShutdown
— Nancy Pelosi (@SpeakerPelosi) December 24, 2018
As a matter of fact, the Federal Reserve has decided to increase interests while the unemployment has reached a new low in the United States at about 3%, which left the markets doubtful on its strategy.
Is a global recession on its way?
So, was this pre-Christmas dreadful performance a sign that a worse version of the 2008 financial cris is on its way? To some, it might be the case.
First of, the Western world has never been so divided since the end of the second world war and the end of the cold war.
With a very unstable situation in Europe – from Brexit to rising alt-right in several countries (France, Spain, Italy, Germany), the European Union seems more fragmented than ever and banks are reluctant to expand their activities on the Old Continent, preferring investments in new territories, such as Asia and Africa.
— Bloomberg (@business) December 31, 2018
As Emmanuel Macron tries to privatize French institutions and Americanize the economy, making it difficult for the middle class to sustain decent living conditions, the United States struggle themselves, squeezed between an ongoing government shutdown and a growing criticism of President Donald Trump’s economical decisions, including the tariffs for Chinese products.
With a global instability and volatile markets, some fear that 2019 might be the grim reenactment of 2008, only in a more fragmented world, making global institutions only more difficult.
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