There is once again panic-selling on Wall Street in the technology sector, which has dragged down the US markets, also impacting the performance of the European and Asian markets. And while we think about the bubble risk, Goldman Sachs explains that there are 5 indicators that can reveal the possibility of a drastic market reversal and the existence of a speculative bubble.
Sales on the big tech companies
The main US indices – Dow Jones, S&P 500 and Nasdaq – together with the Russell 2000 index, which represents the smallest capitalization companies, closed a passionate Thursday, closing the worst session since last October 10 and recording massive losses in the technology sector.
The Dow Jones lost 1.65% yesterday, erasing the gains accumulated the previous day, when it had exceeded 48,000 points, while the S&P 500 lost 1.66%. The worst performance was that of the Nasdaq, which slipped by 2.29%, due to the terrible performances of Nvidia and Broadcom, which lost 3.6% and 4.3% respectively, while Alphabet, Google’s parent company, lost 2.8%.
Week to date, the S&P 500 is up about 0.1% and the Dow Jones is up 1%, while the Nasdaq is down nearly 0.6%.
Bubble risk? 5 indicators to watch
Traders’ worries about a bubble were fueled this week by Oracle, which spooked investors with high valuations and rising investment and debt.
According to Goldman Sachs experts, there are 5 indicators to understand if the market is close to a speculative bubble on the model of the Dot-com bubble, which burst in 2000. And although the experts of the US investment bank do not see an imminent risk of a bubble, the market is approaching critical levels that could justify it.
According to Goldman, there are five indicators to monitor: the high valuations of tech stocks, the increase in investments, the reduction in profits, the increase in debt, the widening of credit spreads.
The other factors that influenced the market
Among the other factors that have influenced the performance of Wall Street in recent days is the growing discontent with the Federal Reserve’s decisions on interest rates, which could disappoint expectations and confirm an unchanged level of rates in the last meeting of the year on 9-10 December. According to CME FedWatch futures, operators are now pricing in a 25-point cut with a low probability of 52% and in any case down from 62.9% a few days ago and 95.5% a month ago.
The end of the shutdown, which lasted a good six weeks, only gave temporary relief to the markets, which then returned to questioning the effects of the blockade of government activities, especially after a White House spokeswoman feared the possibility that some macro data lost during the period will never be recoverable.
