Thursday, September 3, 2015

Financial Commentary - Correction is here! Correction is here! saville
Many analysts have been anticipating a correction in the US stock market for a while now. It has been four years since there was a proper correction in US stocks – last time between August and October 2011. Recently, from August 17 to August 25, the Dow Jones Industrial Average index plunged by more than 10%, and as of September 1 was down about 10% for the year – what could be called correction territory. On August 31 and September 1, U.S. stocks fell by 3.5%.
That said, US equity markets may still be in a bull market, with the current volatility perhaps only a temporary pause in the markets continued rise. On August 26 and 27, US equity markets reversed the recent down trend – on August 26, it surged as some comments from board members of the Federal Reserve suggested that with Chinese economic weakness and continued low oil prices, a Fed rate hike in September was not a given. The market rally lasted into August 27th, as new GDP numbers for the US indicated that economic growth remained robust, at +3.7% in the second quarter of 2015 – handily beating economists’ expectations. The growth of DJIA by almost 2% on September 2 happened after a payroll processor ADP said that businesses in the US added 190,000 jobs in August, up from 177,000 in July.
The stock market’s negativity can be directly linked to Chinese economic and market weakness, as well as low oil prices. Some market participants often tend to shrug these factors off and maintain that Fed rate hike should be made in September – citing the strong economic data out of the US. However, global economic conditions are also influential on conditions in North America.
China’s explosive growth through the 1990s and 2000s drove the growth of commodity prices up to 2011. If China is to slow down significantly, this could have serious repercussions for economies and markets too reliant on commodities (i.e., Canada).

Ukrainian Credit Union Limited

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