There are wings to going down, but the current financial market mood is not.
The Wall Street Journal (WSJ) diagnosed on the 15th (local time) that it is a downtrend with no safe place to invest.
According to the report, the S&P 500, the leading index for the US stock market, has fallen 16% this year, its worst start since 1970.
Gold, a traditional safe-haven asset, also has negative returns this year.
Bonds, another safe haven asset, are also falling in price this year.
This concomitant decline in stocks and bonds reflects investor anxiety and is unusual.
In the meantime, cryptocurrency, known as a hedge (risk hedging) method in the stock market, is also at the level of collapse.
Bitcoin, a representative cryptocurrency, has plummeted by more than a third this year, disregarding the claims of cryptocurrency investors as an 'inflation hedge'.
Proven alternative investments have also lost their attractiveness, and holding cash is burdensome with an inflation rate of more than 8% in the US.
However, investing in real estate is not even considered.
This is because mortgage rates are soaring and home prices are hitting all-time highs.
In the end, the WSJ reported that the only option is to 'stay'.
Some investors continue to hold the stock because they can't think of a better idea, the WSJ explained.
This is evidenced by the relatively insignificant stock market outflow.
According to a recent analysis by US bank Bank of America (BofA), only 4% of money inflows into equity funds from the beginning of last year to date has gone out again.
On the other hand, 61% of the funds that flowed into stock funds went out during the crash during the COVID-19 pandemic, and 113% of the funds flowed out, more than the inflows during the 2008 global financial crisis.
That means investors haven't panicked yet, suggesting that the stock market is likely to fall further, the WSJ noted.
Bloomberg reported a similar analysis.
According to the report, as the Morgan Stanley Capital International (MSCI) global stock index fell for the sixth week in a row, the global stock market capitalization decreased by 11 trillion dollars (about 14,124 trillion won).
However, analysts expect the stock market to continue to decline on concerns over high inflation, monetary tightening by major central banks and slowing economic growth.
Bloomberg explains this with several technical indicators.
First of all, the S&P 500 is still 14% above its 200-week moving average.
The 200-week moving average served as the 'bottom' for all major bear markets in the US stock market.
In other words, there is room for the index to decline this much further.
Less than 30% of the S&P 500 stocks are at 52-week lows.
This is well below the 82% seen during the global financial crisis and less than 50% of the 2018 bear market.
Also, when investor sentiment cools, defensive stocks tend to outperform cyclical stocks.
The Stoxx 600 Defensive Stock Index has been flat this year, outperforming the cyclical stock, which has lost 15%.
However, stock market experts pointed out that the difference in returns between defensive stocks and cyclical stocks is still not large compared to other bear markets.Keywords: