The final quarter of the year has begun with a cautious sentiment among investors, contrasting sharply with the optimism seen at the end of the third quarter.
With China on holiday for the second trading day, overseas markets experienced significant shifts. Investors have started fleeing riskier assets like stocks in favor of safer options such as gold, the US dollar, and US Treasury bonds. Oil prices surged by 5%, highlighting renewed geopolitical risk premiums. The US stock market saw declines across the board: the Dow Jones Industrial Average dropped by 0.4%, the S&P 500 by 0.9%, and the Nasdaq by 1.5%.
The major driver behind these market movements is the escalating conflict in the Middle East. Recently, Iran launched approximately 200 missiles into Israel, significantly raising regional tensions. Concurrently, the Federal Reserve chairman indicated a slow approach to rate cuts, which continues to influence market behavior.
Other factors weighing on the market include rising oil prices and a strike by US port workers, which could reignite inflation concerns and affect Federal Reserve decisions. Israel's readiness to retaliate will also contribute to market volatility. These developments have caused significant fluctuations that weren't accounted for in the past month.
The Wall Street fear gauge, the VIX, soared closer to the 20-mark, closing at 19.26, confirming initial concerns about a potential downward trend. The US dollar index has also risen sharply for two consecutive days and could continue to do so, especially with the Federal Reserve's gradual approach to rate adjustments.
This combination of falling US stocks and a rising US dollar comes at an inopportune time, potentially scaring investors away from the market. The situation's evolution in the coming weeks will be crucial in determining future market directions.
