The stock market has been on a roller coaster ride in recent months, with the three major indices falling more than 1.5% by noon on Friday. Tesla shares hit new bear market lows, BYD saw skyrocketing growth in third quarter earnings, and Aptos had Crypto Twitter talking and traders moving a lot of money. Factory activity in the Federal Reserve Bank district of Philadelphia contracted again in October, and the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average (DJIA) all fell by more than 1.6%. So why is the stock market down? Investment professionals have a few theories.
The military attack on Ukraine overshadowed global markets and caused a new outbreak of risk aversion. Chaos and high volatility should not be a cause for concern for long-term investors, but in the short term, stocks that are less volatile and immune to inflation, such as defensive ones, should be sought. The Federal Reserve's fifth consecutive rate hike this year has also had an impact on the stock market. Don't expect stock market volatility to decrease with another rate hike of 75 basis points (bps) in the can.
The Fed remains much more aggressive with respect to the expected rate-raising trajectory than markets expect in the short term. The fear among investors that Federal Reserve stocks could cause a recession has led many to sell their shares, driving prices down. By the end of September, the three major indices were solidly in bear market territory, meaning they had fallen by more than 20%. The market crash has brought nearly 279 stocks to their respective one-year lows in the BSE, and NSE Nifty fell 186.70 points, or 1.09 percent, to below the 17,200 mark.
BSE's market capitalization hit a low of Rs 251.72 lakh crore in Tuesday's trade. When it comes to investing during times of market instability, there are a few basic ideas to keep in mind. Choose stocks where you are sure of profits; conceptual actions and the price-sale ratio and some other random multiples can be avoided. Many other types of bonds also offer high yields, giving investors the option of finding different sources of return in their portfolios without assuming the biggest potential disadvantages of riskier investments, such as stocks. Overall, when it comes to understanding why the stock market is down, it's important to remember that chaos and high volatility should not be a cause for concern for long-term investors. In the short term, however, it's wise to seek out stocks that are less volatile and immune to inflation.
Additionally, investors should choose stocks where they are sure of profits and consider other types of bonds that offer high yields.
