Nothing to Trump-et about at US Stock Market

If you think that cryptocurrency has done badly since January, perhaps you’d like to console yourself with a look at the world’s stock markets. The US market recently had its worst week since January 2016 and fell by six percent at the end of March. Europe and Asia weren’t in much better shape, with Japan having a five percent fall, the biggest in that region.

And, the sad news keeps on coming, according to an article by Craig Adeyanju in Cointelegraph. He wrote: “On the first market day of the second quarter, the S&P 500 Index dropped by 2.2 percent, the poorest start to the month of April since the 1929 Great Depression.” Fortunately, it’s nowhere near as bad as it was then, because stocks started going up the next day.

Some commentators have tried to connect the downward slide in Bitcoin value, but if that is the case, its influence is minimal. There are other factors that have a much mightier impact.

Trade war with China

President Trump’s much publicised ambitions to impose tariffs on Chinese imports is much more likely to have pre-empted a stock sell off. The government’s investigation into “suspected unfair trade practices” by China has brought a chill wind to the stockmarket and it will announce the products it will target until some time in April, although it is known that they will be in the aeronautics, modern rail, new energy vehicles and high-tech sectors. China will retaliate by hitting U.S. agricultural products, and this will hit the USA hard, because it relies on the Chinese market.

The knock-on effect on American companies that depend on international trade is a decline in stock prices. At least that is what Wall Street claims to be the cause. One head of equities said: “A global trade war, whether it’s real or perceived, is what’s weighing on the market. There’s this huge uncertainty now. If China decides to get tough on agriculture or anything else, that will really spook people.”

The Facebook fiasco

The Facebook-Cambridge Analytica story is another factor. Facebook’s shares had some 13.8 percent wiped off their value and it put pressure on other tech stocks as panic about user data protection went viral.

This might benefit cryptocurrency. If interest rate hikes and trade wars make investors wary of the more traditional markets, they might look more favourably at Bitcoin, which is not government controlled. This is not as far-fetched as it may sound: research by the Commonwealth Scientific and Industrial Research Organization revealed that certain political uncertainties, like Brexit and the election of Donald Trump produced an increased demand for Bitcoin, which pushed the price up. Things should be clearer by May, is the best prediction we can make right now.

 




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