WHAT HAPPENED TO NASDAQ?

WHAT HAPPENED TO NASDAQ?

WHAT HAPPENED TO NASDAQ?

Nasdaq is declining fast recently and its decline is not over yet. But why? First of all, the stock markets offer good opportunities but we can't say they are risk-free. So people invest in companies and the stocks go higher. In recent years everybody invested in stocks because that was almost the only option. US Interest rates are about 0,25% since 2018 and US Bonds don't make sense as the inflation is rising more than bond yield. So people have preferred tech stocks as the importance of technology has risen with the pandemic. So what happened to this trend and these indexes started to decline?

With easy monetary policy FED has printed trillions of dollars and a big percentage of this money has found its way to stock markets. And this easy monetary policy has created inflation with overheated market conditions. And the FED started tapering last year stating that they would complete in March 2022. Best example to understand is your father is just telling you the party is over by midnight and your mood declines with this news. This is exactly the same thing happening right in markets. Nasdaq was enjoying all-time highs and FED just said that the market is overheated and we will finish QE and start tapering. Russia and Ukraine conflict was also added to this environment and the stocks started to decline fast. But what about the money printed during the pandemic? Did this money evaporate? Of course NO!

As you can see above, the amount of money printed by the FED is enormous. It has reached to 9 Trillion US Dollars. The investors are just changing the lane for a few weeks or months but once they see the opportunity they will change it back to stock markets. Just look at below what happened in the 2020 March Pandemic decline and rebound.

Yes, you have seen correctly the market declined %40 but then it has risen more than %200. So this correction is not a crash; the market is digesting its gains. What is next? The investors will spend some time with other assets but they will come back to stock markets again.

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25 January 2022 08:40

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