Avatrade comments as global markets tumble

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As the global market tumble, investors are moving towards safe haven assets.  We ask Kate Leaman, chief market analyst at AvaTrade what has caused this sudden drop off, and what investors need to be mindful of during periods of market uncertainty.

“Investors and traders around the world woke up this morning to a chaotic scene, the likes of which hasn’t been seen since the beginning of the COVID-19 pandemic.  This comes as global stock markets have plunged over fears the US is heading for a recession, along with ever-growing tensions in the Middle East.”

“The day began with Japan’s benchmark index, the Nikkei 225, suffering its biggest drop in history, with the index closing more than 12% down.  As European stock markets opened, the FTSE 100 tumbled by as much as 2.5% in early trading – its sharpest fall since July last year – while the Euronext 100 plunged by 3.5%.  Elsewhere, even crypto markets have plummeted, with Bitcoin suffering its worst drop since the collapse of FTX.”

“The marked decrease in stock markets around the world has come amid growing fears that the US is heading into a recession.  This event, coupled with rising geopolitical tensions in the Middle East, have all of those involved in the financial markets concerned, prompting investors to pull back, which in turn has sent market values tumbling.  In fact, the markets are so volatile that even the news of Warren Buffett’s Berkshire Hathaway selling 50% of its stake in Apple was enough to raise further alarm and cause increased negative sentiment.”
 
“During times of turmoil like this, it's normal for investors to seek safer alternatives.  In this instance, we’re seeing traders move towards bonds and gold.  Bonds provide predictability when stocks are tumbling with their steady interest payouts.  Meanwhile, gold has remained a reliable store of value over time.  This shift towards more stable assets is a tactical decision to keep portfolios balanced and resilient amid the volatile nature of the market.”

“Turning to safer assets is an effective strategy to safeguard hard-earned money.  By diversifying into assets such as bonds and gold, it can ease the blow of market instability, ensuring that parts of an investment portfolio are protected against downturns.  These safer assets provide stability and will not let market fluctuations dictate their financial future.”

“It is also critical for investors to remain informed and adaptable among market unpredictability.  By monitoring economic indicators as well as market trends, traders gain invaluable insights into when the markets may rally.  Additionally, investors must ensure they adjust their risk management strategies, whilst also making sure that their portfolios are diversified to tolerate market ups and down.  For traders, it is crucial that they are not overly exposed to a single asset class or sector – diversification is key in having an effective and efficient investment strategy, especially in volatile markets.”