Three reasons for the stock market crash

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  • US economic data have been weak and add to recession fears. 
  • Trade uncertainty weighs despite China’s week-long holiday.
  • Political uncertainty has risen with further developments in both parties.

US stock markets are falling for the second day in a row – and Wednesday’s declines are worse than Tuesday. Safe-haven assets such as the Japanese yen and gold are moving higher.

1) Signs of a slowdown

Tuesday’s disappointing ISM Manufacturing PMI – the worst level since June 2009 – which indicates a higher chance of a US recession next year. A small miss in the ADP Non-Farm Payrolls – showing an increase of only 135,000 private-sector jobs in September – added to the misery.

The biggest test is Friday’s Non-Farm Payrolls report – which will likely show further moderation, but the exact number matters. Preview.

Unless the NFP is spectacular, markets will continue struggling.

2) Trade uncertainty

China is celebrating its Golden Week and 70 years to the Communist revolution – but the US is working regularly. Reports that the US is considering limits on Chinese investments continue weighing despite a denial from the White House – which was only half-hearted. The US is not considering delisting Chinese companies “at the moment.”

Financial controls serve as a major escalation. High-level talks are scheduled for next week and if we have learned something from previous rounds – they are bound to fail.

3) Trump’s impeachment and Warren’s rise

And to top it off, the fast-moving impeachment inquiry increases political uncertainty and also hurts stocks. Secretary of State Mike Pompeo’s admission that he listened to the famous July 25 Trump-Zelensky call and Democrats’ subpoena of White House documents are the latest developments that weigh.

Significant developments in the Democratic party also weigh. The announcement that Bernie Sanders temporarily suspends his campaign for medical reasons increases the chances that Elisabeth Warren – already gaining traction – wins the Democratic nomination. Warren enjoyed Joe Biden’s retreat in the polls – partially related to his role in the Ukraine-gate scandal. Warren is not favored by Wall Street after fighting for financial regulation.

New opinion polls are set to show Trump’s falling approval rating and Warren’s emerging status as the front-runner.

Overall, the toxic mix of weak economic data, trade concerns, and political uncertainty all weigh on stocks.

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About Author

Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.