It’s been a tough time for the markets - which are under pressure from three angles - is this the start of something worse, or will the latest crisis blow over?
Markets still in a tizz but are they beset by a perfect storm?
On the 12th March it felt like investors could learn a lesson. You may recall, markets fell sharply back at the end of January on fears of rising interest rates. But by March 12th, while the likes of the FTSE 100, Dow Jones and S&P 500 languished, the NASDAQ Composite had fully recovered, hitting a new all-time high.
So, there you have it. The tech dominated NASDAQ is not correlated especially strongly with the rest of the stock market. It was not a new lesson - the index recovered more quickly from the 2008 crash, when certain companies, the giant techs in particular, saw their stock soar while the economy was stuck in deep mire.
It is just that when you take a look this morning, the NASDAQ is down 8.5 per cent from the March, and indeed the all-time, peak.
All of a sudden, the NASDAQ looks just like everything else.
Talking about everything else, the Dow Jones Industrial Average is down around five per cent in the last few weeks, but down almost 10 per cent since its peak in late January. The FTSE 100 has lost a more modest two per cent or so in the last four weeks but is also down close to 10 per cent since the January peak. It has been a similar story for the FTSE 250.
As for market volatility, the VIX, that tracks the moving average of the S&P 500, is now hovering at its highest level since 2015, following a run lasting close to 12 months of unprecedented low volatility.
Three winds are blowing.
The fear that interest rates may go up faster than generally expected won’t go away. The FED was expected to increase interest rates seven times in 2018/19, well, in March one of those rate hikes happened, it is on course.
But the sneaky suspicion that rates may have to be increased more rapidly, or that the hikes may have to continue into 2020, is an ever-present fear. Considering the levels of leverage out there in the private sector, across much of the developed world, there is a strong suspicion that the economy won’t be able to take too many hikes.
Then of course, there is the Trump trade war sabre rattling. Now the US President is threatening to impose tariffs on 1,300 Chinese imports, and China is threatening to respond in kind.
We have no idea, at this stage, how much of this boils down to negotiating tactics. But trade wars can never be good, and this idea that the US is the victim of the nasty World Trade Organisation and China, which Mr Trump suggests, comes straight out of fantasy. It is akin to the school bully saying he, or maybe she, is fed up with being taken advantage of.
The third reason is more complex.
The sell-off in tech seems largely unrelated to the two fears described above. And certain companies are having a disproportionate effect on the fortunes of the NASDAQ.
Over the last month, Facebook is down 17 per cent, Apple is down seven per cent, Alphabet has lost four per cent, Amazon 12 per cent and Tesla is down 24 per cent. But Tesla has lost 30 per cent since June 2017.
It is just that when you look at the detail, you find different reasons for the falls in individual tech stocks.
Facebook is down because of the data breach related to Cambridge Analytica.
Amazon is suffering because the US President seems to have it in for the company. (One theory, which I doubt, by the way, is that Mr Trump wants to punish Amazon, as its boss and founder, Jeff Bezos, owns the Washington Post which is a big critic of the President. Surely, not even Mr Trump can stoop so low.)
Tesla is down because of production delays and a recent accident involving one of its cars in auto-pilot mode.
In my view, because of the way it uses data, Alphabet is lucky to have seen such modest falls and I don’t think there is a good reason for the drop in the Apple share price, other than that sentiment is against it.
But will the falls continue?
From the point of view of the techs, it partly depends on how the individual issues turn-out, but it also depends on sentiment.
Will interest rates rise higher than expected? This may depend on whether automation can start leading to higher productivity, giving the economy more spare capacity.
As for the dangers of a trade war, that one depends on what game Mr Trump is playing.
These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees.