Top 5 Market Movers in 2018
Traders are always looking for significant market volatility, where they can react quickly and take advantage of the movement. In this article we’ll be looking at some of the most significant market moving events through 2018, what the root causes were and how you could possibly identify opportunities in the coming year.
We’re nearing the end of 2018, a year marred by trade wars, Brexit, twitter rants and more, but, where did trading opportunity arise?
1. The Great Cryptocurrency Crash!
As you’re probably aware, cryptocurrencies are notorious for market volatility, with large sweeping movements being commonly characteristic of the decentralised financial instruments. As the year began with a bitterly cold January, cryptocurrencies were soaring in popularity and significant market movement was sure to follow. 2017 had ended with Bitcoin reaching highs of $19,498 as the world began to truly take stock of a new digital currency era…
From January 6, however, the Bitcoin tower began to topple. 6 days after the fall began, rumours started to circulate that South Korea was in the process of banning cryptocurrency trading, resulting in a 12% drop in the price of Bitcoin.
A couple of weeks later, a huge $530 million NEM was stolen from Coincheck, Japan’s largest cryptocurrency over-the-counter market, forcing Coincheck to suspend trading indefinitely.
Now, unlike most fiat currencies, where price is affected by economic factors like inflation and interest rates, cryptocurrency price is driven by different factors, including mining difficulty, utility and public perception.
Following the negative developments at the start of the year, the public perception of cryptocurrencies began to falter, sending prices tumbling. As a result, Bitcoin fell by about 65%, losing a least 342billion USD in market capitalization in the first quarter of 2018!
Keep your ear close to the ground in 2019 if you’re planning on trading cryptos! Keeping up with current events in cryptocurrencies could put you ahead of the game when trading.
2. The Starting Sell-off/Global Indices Sell-off
Not a market to be ignored, the global indices market experienced its very own dark trading day as February began.
As always at the start of February (and every other month), the Non-Farm Payroll (NFP) figures were released, causing significant movement across all USD crosses. This particular release, however, was much better than expected, spooking investors who had concerns that US interest rates may begin to rise faster than previously anticipated, causing the S&P500 to fall by a staggering 3.9% (Figure 1). The index had previously experienced its best start to a year since 1987, before succumbing to one of the fastest stock market corrections in history!
Around the same time, following an FOMC meeting, it was suggested that Fed officials believed US economic growth would pick up pace, possibly causing monetary tightening to be less gradual than originally expected. This led to the Dow Jones dropping by 4.6% on February 5, and a further 4.2% on Thursday 8 (Figure 2).
The reaction wasn’t just constrained to the US though. In light of a strengthening global economy, the Bank of England suggested that interest rates may rise earlier and more significantly, albeit Brexit-related uncertainty posing a huge risk to the economic outlook. As a result, the FTSE plunged by over 4%.
The German DAX dropped by 5.7% while the French CAC40 fell by 2.9%. Meanwhile in Asia the Nikkei 225 was no exception, as the index slid by a huge 4.5%. Even the FTSE All World index fell by a whopping 4.3%, ending a winning streak for global stocks, the longest seen since 1994!
Always remember that in some situations a combination of different economic releases may have a combined effect on the markets! Manage your exposure effectively when implementing your risk management strategy.
3. The Impact of the @POTUS Twitter Account
As the markets opened on Monday, April 2, a huge sell-off resulted in the S&P500 closing below its 200-day moving average for the first time since June 2016. However, it wasn’t just the S&P500 that was affected, as a broad sell-off was about to ensue!
By the afternoon of April 2, 10 of 11 major S &P sectors were trading at correction levels, with the worst-hit sectors being consumer discretionary and technology. However, rather than looking at broad reactions across the markets, we’re looking at the effect of one individual… Donald Trump!
The US President first took aim at Amazon, stating:
Following the outburst Amazon shares initially dropped by 5.2%, with Trump’s overall barrage of criticism pushing Amazon shares down by a huge 10% over the period of one week!
He hasn’t just caused casualties though! In some cases, especially when concerning the Dow Jones, Trump’s twitter escapades have caused an increase in price!
Following this announcement, Trump actually caused the Dow Jones price to rise to $26,773.94 on October 3. Perhaps a good approach in 2019 would be to monitor the @POTUS account closely. It may give you some great market insight while being entertaining all at the same time!
4. Facebook Façade
One publicly listed firm that has had a truly tumultuous year is the social media giant, Facebook.
At the start of the year Facebook announced that it was making some significant changes to its news feed. The changes aimed to rank content from friends and family above branding and marketing material. As markets feared that Facebook was losing its edge, share price fell by 4%, taking $24.5 billion off its market value!
Then along came the Cambridge Analytica scandal! Reports were released indicating that a UK data analytics company had access to data from over 87 million Facebook profiles! This data was then apparently used to exercise significant influence over a number of infamous campaigns like Brexit & Donald Trump’s election campaign. As a result, Facebook shares were down by nearly 7% by the next day, taking $36 billion off Facebook’s market value…
Facebook would later announce that growth had slowed following the Cambridge Analytica scandal… wiping $119bn off the firm’s market cap! Once the company announced that 3 million users in Europe had left Facebook since the scandal, shares took a nosedive of 19%!
Something to take away from Facebook’s performance is that no company is infallible to diminishing public opinion. Watch closely how a firm handles its public affairs to get a better understanding of how their shares may perform.
5. October’s Correction Territory
Not a month to be outdone by its predecessors, October 2018 exhibited some of the most significant market movement of the year through its short few weeks. On October 10, the Dow Jones plummeted by more than 800 points in the worst drop seen since February amid fears of rising interest rates and an expected slowdown in global growth.
At the same time, the technology industry within the S&P500 (US500) experienced its worst day in seven years, pulling down the S&P500 by a monstrous 3.3%. The S&P500 went through a five-session losing streak, the longest seen in nearly two years! Microsoft and Intel plunged by more than 3.5% each, Amazon declined by 6.2%, Netflix lost 8.4%, and Facebook and Apple lost more than 4% each.
Nasdaq also fell by 4% in its largest single day sell-off since June 24, 2016. But there was more yet to come!
On October 11, the S&P500 fell further, resulting in a total drop of over 6%, smashing through several key technical levels and breaking below the lows seen back in January and February. The S&P500 smashed through its 50-day and 200-day moving averages, giving a clear sign of rapid price decline relative to loner-term trends!
With such huge declines seen across the board, October went down in history as one of the worst months for the S&P 500 since September 2011! Overall, the stock market lost almost $2 trillion, a devastating blow resulting in one of the worst months since the financial crisis!
As we close the book on a tumultuous year, analysing and understanding the root causes for such significant movements can be really useful when trying to asses trading opportunities in the coming year. Always remember to concentrate on enhancing your skills at every turn, consider economic releases and news events when making trading decisions and always keep risk management at the forefront of your mind!
Bring on 2019!
