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The Market Wrap for August 16: The Signs Start to Flash Red

Aaron Levitt Aug 16, 2019

This week, traders were faced with a continuing deterioration in the global economy. Worries in Argentina sent many traders scrambling for safety at the beginning of the week, following on the trail of the trade issues between the U.S. and China. Talks between the two nations in a trade war battle have ebbed and flowed over the course of the year, but recent rhetoric has turned caustic and many analysts now believe that a deal won’t happen between the two nations anytime soon.

These worries, as well as dwindling international data, negative interest rates overseas and other conflicts pushed traders to the brink. Safe havens such as gold, cash and Treasury bonds saw major inflows. This caused another problem – the so-called yield curve finally inverted between short-term and intermediate-term bonds. This was seen as the strongest signal yet that a recession could be happening sooner than later.

Not helping matters was a relatively poor week for earnings. Many firms missed expectations and had lower overall guidance figures. Investors took this as a sign that the trade war is negatively influencing profits, and this added to the selling pressure.

All in all, the inverted yield curve, poor data and overall depressing mood sent stocks plunging over the week, resulting in heavy losses.

Be sure to check out our previous Wrap here, when the trade war continued to hurt stocks.

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