Investing is not always a simple voyage. For many new investors, the market crash is something they have never experienced, including myself. So it was a shock when my portfolio fell by almost 10% last week.
In these situations, you may be prone to panic. Understanding why the stock market is declining can help make your portfolio more scared.
Why financial markets went into the red
There are several reasons why financial markets fell last week. For example, concerns about conflict in Ukraine, concerns about inflation, and concerns about Covid-19 are still imminent in financial markets.
Susannah Streeter, Senior Investment and Market Analyst Hargreaves Slan’s DownExplanation: “The threat of conflict at the front door depends on the European index, as the hope of fresh and meaningful movements from diplomats is beginning to diminish.”
On the other hand, rising inflation has had a significant impact, especially on tech stocks. Investors are beginning to worry that central banks will take a more aggressive stance amid growing speculation that inflation will continue. This led to a decline in the market.
High inflation affects a company’s reputation. This is because it can increase costs while reducing pricing power.
Performance of individual stocks
The market has fallen overall, but individual stocks have all performed differently.when Stocks and stock tradingIt is useful to monitor the performance of individual companies.
Some stocks – like Barat Development FTSE 100 – Investors are experiencing a significant decline as they are concerned about the impact of expected further rises in interest rates on long-term demand.
Mr. Streeter explains: “Like the technology frenzy of the cheap and easy money era, I’m worried that the red heat market could cool dramatically as mortgage payments begin to rise and living costs spike.”
Meanwhile, technology-centric companies continue to suffer. “For the past 18 months, companies that have entered the market with his prospectus are nearing the end of the era of cheap funding and their confidence in their business models is rapidly diminishing,” Streeter warned. ..
There’s some good news …
For those who invest, that’s not all bad news. Today, some companies are performing better than others.
Vodafone is doing well and speculation about the future is raising interest in the company. The possibility of a merger may be on the card with Three UK, and negotiations are ongoing to merge the business in Italy with rival Iliad.
“This deal will create a powerhouse in the telecommunications industry, and Vodafone will have a much greater impact on the mobile and broadband businesses as a whole. It also appears to be swirling with Vodafone layered on armor. It will dodge private equity bidders, “explains Streeter.
Unilever is also performing better than last week. Investors were less responsive to the proposal to buy GSK’s consumer sector. Investors welcomed the company’s decision not to offer more than £ 50 billion away from trading.
What’s Next for Financial Markets?
Unfortunately, neither problem has been resolved and there is still a lot of uncertainty in financial markets.
Without the crystal ball, it is impossible to know what will happen next. But it seems unlikely that a turbulent era is still behind us.
The IMF warns that the Federal Reserve’s monetary tightening policy could strengthen the dollar and undermine developing countries that are still recovering from Covid-19. This raises concerns that the recovery of the global economy may not be as strong as initially thought.
Meanwhile, China is still blocked by the country’s zero tolerance policy towards Covid-19. This can impact the market and put additional pressure on the supply chain.
Finally, geopolitical tensions surrounding Russia and Ukraine remain high and can continue to cause market uncertainty until resolved.
This does not mean that the investment needs to be postponed. If you want to start investing and take advantage of the potentially low market valuation, Stocks and stocks ISA It can be a good starting point.
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Investment Panic: Why My Portfolio Dropped 10% Last Week
https://www.fool.co.uk/personal-finance/investing-panic-why-my-portfolio-dropped-10-last-week/ Investment Panic: Why My Portfolio Dropped 10% Last Week