More volatility on Wall Street to come, warns Barclays
Barclays expects the volatility dictating trading on Wall Street to continue, and has recommended investors remain wary of buying despite heavy price falls.
In a note on US equities, Barclays suggested that there could be more falls to come, noting: “Fundamentals have not changed but we expect volatility to remain elevated in the short term and do not recommend buying this dip.”
On Wednesday, the Dow Jones Industrial Average plunged, losing 831 points to close at 25,589, its biggest daily fall of the year. The S&P 500 also slumped, posting its fifth-straight decline, while the tech-heavy Nasdaq lost more than 4%, its weakest session since June.
There were a number of catalysts for the sell-off, including the prospect of US rate rises and fears of rising bond yields; the Trump Administration’s combative relationship with China; and concerns about valuations heading into earnings season.
Barclays pointed out that comments from the Federal Reserve chairman Jerome Powell in particular had unnerved the market.
“As a result, there is now much more uncertainty about where the terminal or neutral rate lies," analysts argued. "This led bond investors to reassess the long-term level of real yields. The move in nominal ten-year rates has not been accompanied by an increase in inflation expectations.”
The heavy selling Stateside weighed on European markets, and at midday in London Thursday, the FTSE 100 was down 135 points at 7,010.13, holding above the 7,000 mark but at its lowest level since March.
With Barclays seeing the two main catalysts behind the equity selloff being Fed commentary and by the White House administration on US-China trade, they concluded: "Fundamentals have not changed but we expect volatility to remain elevated in the short term and do not recommend buying this dip."