“Typically, v-bottoms show themselves when the market declines on news, as in a single event that rocks the market but that wasn’t the case this time,” said Thrasher. “Instead we saw a slow bleed in market participation that finally broke the dam of selling and sent stocks across the board lower.”
Related: Trend Following ETF Investors Should Not Be Deterred by Correction
Consumer Spending Rises
The Commerce Department revealed on Monday that U.S. consumer spending rose for a seventh straight month in September by 0.4%. The increase saw more consumers spending on motor vehicles and health care, but the data also showed that income recorded its smallest gain in more than a year due to moderate wage growth.
The data fell in line with forecasts of economists polled by Reuters who also predicted an increase of 0.4% in consumer spending for the month of September. The small rise in income could be a telltale sign that the stimulus from a $1.5 trillion tax cut package put forth by U.S. President Donald Trump’s administration may be waning.
“It remains to be seen how long the spending spree can continue,” said Sung Won Sohn, chief economist at SS Economics in Los Angeles. “The stimulus from the tax cut has plateaued. Rising interest rates and volatile stock markets are having a psychological as well as a real effect.”
More Tariffs on the Horizon
As if the markets don’t need anymore sell-offs from rising rates, tariffs could come back into the fray. The U.S. is purportedly preparing another round of tariffs against any remaining Chinese imports if trade talks between Presidents Trump and Xi Jinping do not materialize into something tangible.
This new round of tariffs could be scheduled to take place as early as December and would bring the total to $257 billion worth of goods. It would be the final blow dealt by President Trump’s administration in an effort to force China to come to terms to a trade agreement.
In September, President Trump moved forward with imposing a 10% tariff on $200 billion worth of Chinese goods that includes a step-up increase to 25% by the end of the year. Less than 24 hours later, China responded with $60 billion worth of tariffs on U.S. goods. Both the U.S. and China have already slapped each other with tariffs worth $50 billion total.