On Monday, the S&P 500 and other major stock indexes appeared to enter correction territory after days of substantial decreases in value. The stock market overall saw substantial losses across multiple sectors, but the rapid recovery indicated the resilience of the market.
Stock Market Index – A collection of stocks, bonds, or other investments grouped together bases on industry or size.
Support Level – The level at which buyers are likely to purchase a stock.
Dow Jones Industrial Average – Stock market index of the 30 biggest publicly traded companies in the United States.
S&P 500 – Stock market index that tracks the performance of 500 large publicly traded American companies.
Fintech – Technology sector that supports financial services and banking.
Super Bubble – A situation whereby asset prices are extremely inflated and are at risk of dropping by 50% or more
Major Losses and a Quick Recovery
Major indexes were brought crashing down over the last week, with investment banks warning their clients that things could still get worse. The tech sector suffered particularly significant losses, and experts say that key indices of a healthy market, including the Russell 2000 and Nasdaq 100, have dropped below crucial support levels.
The Nasdaq Composite Index dropped by 4.9%, and the Dow Jones Industrial Average dropped by 1,115 points.
It marked a particularly rough start to 2022, but the dramatic recovery witnessed by the end of Monday was described by major investors as the biggest turnaround in more than a decade. It was the first time that the Nasdaq Composite had dropped by 4% before closing up before the end of the same session. The Dow also saw the biggest single-day comeback since March of 2020 – the beginning of the COVID pandemic.
After plummeting by more than 1,000 points, the Dow Jones Industrial Average erased all of its losses by end of trading Monday.
Is Now the Time to Invest?
While major stock indexes turned their fortunes around on Monday, continued worries about rate increases and inflation meant that fintech stocks still fared badly. Global X Fintech ETF FINX ended on Monday with a loss despite the wider turnaround. The index ended Monday down 0.8%, with some of the worst affected stocks including SoFi Technologies Inc. (SOFI) which dropped 4.3% on Monday, and Upstart Holdings Inc. (UPST) which dropped 1.5%.
While the market remains rocky, some analysts say that now may be the right time to make investments in fintech stocks, expecting their value to increase in time.
Are We Heading Towards a “Super Bubble”?
According to chief investment strategist at Global Markets Operations (GMO) Jeremy Grantham – the man who predicted the dot-com bust in 2000, the United States is currently in an epic super bubble that could soon wipe out $35 trillion in value.
In the paper, he said that the U.S. is in a stocks, housing, and commodities super bubble – meaning a crash could occur at any time. Typically when a superbubble bursts, stock values crashes by 50% or more.
“Today in the US we are in the fourth super bubble of the last hundred years,” Grantham explained in the paper, and suggested that the S&P 500 could drop by 45% from current levels. He did not, however, provide a time frame for when he expects the bubble to burst, and it’s worth mentioning that Grantham has said the U.S. is in a super bubble for several years already.
Jack Buckby is a British author, counter-extremism researcher, and journalist based in New York. Reporting on the U.K., Europe, and the U.S., he works to analyze and understand left-wing and right-wing radicalization, and report on Western governments’ approaches to the pressing issues of today. His books and research papers explore these themes and propose pragmatic solutions to our increasingly polarized society.