On Thursday last week, the price of crude oil dropped to its lowest level in over 12 years and the stock market in China crashed by 7% percent overnight.
Due to these events, the S&P 500 fell 2.4%, the Dow dropped 392 points, and the Nasdaq suffered a 3% hit. Overall, the Dow is down by 6% for 2016.
According to the President of Investment Advisory at Yardeni Research, Ed Yardini, investors are something in a panic mode for the New Year, while Tim Anderson, Managing Director of MND Partners, commented that this could be the beginning of a ‘bear market’ (meaning falling prices encourage selling).
Many believe that the biggest threat to the stock market in the United States is China, the stock market of which is in turmoil. In addition, there has been a decline in the value of China’s currency, and its economy is slowing down more than investors have realized.
The price of crude oil also continues to decrease, which is good for consumers as this means that the price of gasoline will decrease accordingly. This could encourage some people to look at franchise companies and various franchise opportunities to which people need to travel, as they have fewer concerns about how much it will cost them to get to these destinations.
Some, like billionaire George Soros, predict that this could be a repeat of the financial crisis in 2008, while others feel there will be a rebound from the fears with regard to China. Yardeni commented that this is most likely just a passing phase and not the start of another global recession.