Stocks fell for a third day in a row on Thursday as political instability in Greece, lower Chinese shares, and concerns over a slowing global economy gave investors more reasons to sell than buy stocks.
It was a hard down-day for the stock market as the Dow Jones Industrial Average gave back 358 points to close 2.06 percent lower and the Nasdaq Composite lost 2.82 percent. The last time there was volatility in the stock market of this magnitude was in late June when fear of Greece defaulting on its debt and separating from the European Union was on investors minds.
Perhaps it was Greek Prime Minister Alexis Tsipras’s resignation on Thursday and call for a quick election set for Sept. 20, three days after the September FOMC meeting, that finally pushed investors to the breaking point.
At one point Thursday morning it appeared the bulls were mounting a push higher that would erase much of the day’s losses, but after a couple of attempts the selling pressure resumed and stocks declined into the closing bell. Thursday’s market action was significant because it was first time in a few weeks that investors were not rewarded with higher prices at the end of the day, after buying the intraday dips in prices. Additionally, it was the first time the Standard and Poor’s 500 closed over 1 percent below its long term trend (200-day moving average) since the Ebola scare in October.
As stocks fell, investors shifted into more defensive assets such as gold, driving the price of gold up more than 1.7 percent on the day. Investors also shifted funds in to bonds, a trend that’s been in place for nearly a month now. The top performing bonds this week are high quality, longer maturity bonds with the Barclay’s U.S. 20+ Year Treasury at the top of this week’s report gaining 1.90 percent over the past five trading days followed by the S&P/Citigroup International Treasury Bond index up 0.88 percent over the same period.
This commentary originally published in the Reno Gazette-Journal. Performance numbers used in this article were obtained through eSignal and are not guaranteed to be accurate.
Laif Meidell, CMT, President of American Wealth Management, and Portfolio Manager of the AdvisorShares Meidell Tactical Advantage ETF (NYSE Arca: MATH)