It is known to many investors (old and new) that Dow Jones Industrial Average is simply a stock market index. Still named Dow, this Dow Jones Industrial Average is established on thirty large public trading companies on any given trading day. The term Dow stock is often utilized by the investors and the media to imply health summary of the whole stock market. This paper will explain why the Dow Jones Industrial Average is down today.
The 4th of December 2018 was marked by a drop down of the Dow Jones Industrial Average and an assertive market sell-off diminished all the hope for a comeback. The day before had seen a moderate stock bounce back, and the investors were wondering on why the Dow Jones Industrial Average fell the day after. Some days before this happened the White House had declared a short-term truce between the United States (US) and China who are known to be trade rivals. Nonetheless, the American government has flickered on offering solid information showing the concessions that China made during the G-20 summit, after the truce was announced.
The US concurred to hold back their threat of doubling tariffs on Chinese products. Still, judging on the statements issued by the delegates of the two countries, little was agreed on during that meeting. What succeeded was a disorder caused by the Trump administration and the White House advisor giving out dissimilar statements on when the hold on tariffs would commence. The discrepancies made investors ponder if there will be harmony between the two countries in the near future. The investors have lost faith, and the marketers are getting worried regarding a recession that is hinting to be around the corner.
During the same period the yields of ten-year Treasury bonds went down to the decreased by the largest amount seen in a decade. It has been a usual experience for the 10-year Treasury bonds yield to rise and fall, but investors are worried this time around because it made the bond yield curve to fallen out. This shows that there will be an increase in the two-year bonds yields and a decrease in the yield of the ten-year bond. Moreover, it implies that there will be a reduction in inflation and the rate of betting interests in the next decade. These are signs of a recession because they are considered default financial atmosphere.
In conclusion, typically, up to when the yield curve turns around will the stock market enter a phase of aggressive sale-off. This means that the two-year Treasury bond yields rise above those of ten-year bond.