The stockmarkets took a real rollercoaster ride the week of February 5, with the Dow Jones plummeting more than 1,100 points in a single day’s trading on February 5, the most severe decline in its history in number of points, although only 4.6% in relative terms as compared to the 22.6% crash on October 19, 1987. The index shed a further 1,000 on February 8. US indices had put in spectacular rallies since the start of the year and their growth was not sustainable, so a change in trend was inevitable.
However, this market shift remains a clear sign from investors, and comes just as the Fed undergoes a change in leadership. Janet Yellen took her final bow on the evening of February 2 and Jerome Powell was sworn in on February 5. Market losses and the change in leadership at the Fed are connected: the US central bank is very powerful and the choices it makes over the months ahead will be crucial for both the US economy and market performances. Continue reading