(MENAFN- FxPro) Months of stock market euphoria have given way to uncertainty and panic. After an exuberant ride up, the Dow is now back to where it was on Oct 26, 2019. In a high tailed retreat, the benchmark has given up over 3,300 points since its Feb. 12 peak of 29,551.
Still, there are stock market bulls encouraging traders and investors to buy the dip. In a CNBC interview Tuesday, top White House economist Larry Kudlow said: To me, if you are an investor out there and you have a long-term point of view I would suggest very seriously taking a look at the market, the stock market, that is a lot cheaper than it was a week or two ago.
While Donald Trump's election chances figure into Kudlow's calculus, some investors with money riding on it are still bullish too. JP Morgan's year-end S & P 500 target of 3,400 projects the broad equities index to rise 10% above Thursday's level. Markets are increasingly certain of a federal funds rate cut in March. The CME FedWatch tool indicates the Fed funds futures market forecasts a 70% chance the Federal Reserve will reduce interest rates at the March policy meeting.
Markets are increasingly certain of a federal funds rate cut in March. The CME FedWatch tool indicates the Fed funds futures market forecasts a 70% chance the Federal Reserve will reduce interest rates at the March policy meeting.
On Feb. 3, several days ahead of the stock market's spectacular rout, Allianz adviser Mohamed El-Erian warned not to bet against coronavirus: The coronavirus is different. It is big. It's going to paralyze China. It's going to cascade throughout the global economy. And importantly, it cannot be countered by central bank policies. So I think we should… try and resist our inclination to buy the dip.
There could be more pain ahead for the stock market between now and the Fed's March policy meeting. In fact, the market's movements over the past week checked off all four boxes that triggered the 1987 'Black Monday' panic sell off.
That was the stock market's worst one-day loss in history.
Here is what happened just before the crash:
1. The market makes huge gains beforehand…
2. Market euphoria reigns…
3. Sharp downturns precede the crash…
4. Financial innovation backfires…
Here's Why This Is Not A Stock Market Dip You Want To Buy, CCN, Feb 28
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