A man walks in front of an electronic screen displaying Japan’s Nikkei share average outside a brokerage in Tokyo August 2, 2024. — Reuters picKUALA LUMPUR, Aug 5 — A selloff that rocked equity markets around the world is clouding the outlook for investors looking to buy stocks on the cheap, as worries over the US economy and disappointing tech earnings threaten more losses ahead.
But buyers of the dip risk being steamrolled if recession fears grow following last week’s run of alarming US data. The S&P 500 has fallen an average of 29 per cent during recessions since World War Two, according to Truist Advisory Services. Stocks have soared this year in a rally fuelled by excitement over artificial intelligence technology and a so-called Goldilocks economy where growth stayed resilient while inflation cooled.
“We’ve been looking to potentially get into some of those expensive names and frustrated we haven’t had an opportunity, and now we’re getting there,” said Lamar Villere, portfolio manager at Villere & Co. And while expectations for tech companies’ results may have been high, some of the heavyweights delivered strong earnings, including Apple and Facebook-parent Meta Platforms.
“This isn’t a Category 3 hurricane, but we are seeing how markets react to signs that the economy is normalizing after turning hot in the first half of this year,” said Art Hogan, chief market strategist at B. Riley Wealth. “Markets can find themselves overreacting and investors glom on to anything as an excuse to take profits.”