Recent global markets have experienced a significant downturn, impacting currency markets, Asian, Arab, and European stock markets, as well as oil and cryptocurrency values. This turmoil has led to widespread speculation about the causes of the crisis, particularly after renowned investor Warren Buffett reduced his stake in Apple significantly, managing to exit at a critical time. Over $2 trillion in market value has been wiped out due to fears of a global recession.
The declines are attributed to three main factors that coincided:
*US Jobs Report*
The unemployment rate in the US rose to 4.3%, higher than the expected 4.1% and the highest since October 2021. The Sahm Recession Indicator, a metric used by many banks, signals a recession when the three-month average of the unemployment rate exceeds its lowest point in the previous year by at least 0.5 percentage points. With the unemployment rate hitting 4.3%, it indicates a sharper-than-expected downturn, impacting bond yields more rapidly than anticipated.
*Unexpected Interest Rate Hike by the Bank of Japan*
The Bank of Japan raised interest rates from previously negative levels, causing a sharp increase in the yen's value. This led to a phenomenon known as "carry trades," where investors borrow in low-interest-rate currencies (like the yen) to invest in higher-yielding assets elsewhere. As the yen strengthened over 11% against the US dollar, investors who had relied on these carry trades faced losses, particularly in US technology stocks.
*Geopolitical Tensions in the Middle East*
The markets are also under pressure due to escalating tensions in the Middle East. The assassination of Hamas's political leader Ismail Haniyeh in Tehran, following the killing of a Hezbollah military leader in Beirut by an Israeli airstrike, has heightened fears. Both Hezbollah and Iran have vowed retaliation, prompting travel warnings and evacuations.
In this turbulent environment, while many investors have suffered significant losses, others see opportunities.
Volatile periods can offer chances for savvy traders to profit.
For instance, some traders engage in short selling to capitalize on market swings. Exness, with its low and stable spreads, provides traders with confidence during such times, ensuring quick access to funds if needed.
Additionally, Exness offers Islamic accounts with no overnight interest charges, allowing strategic trading without additional costs. For more information about Exness's diverse account options, click here.
