Why Stock Markets React Negatively to Positive News

Is the market reaction more to do with the nervousness around expensive stocks? Or can we expect a change to corporate profitability?

Dan Kemp 7 February, 2018 | 7:07AM
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how the S&P 500 has fallen volatility stock market

US stocks listed on the Dow Jones, S&P 500 and tech-focused Nasdaq markets have all fallen since their all-time highs late last month, although they finished yesterday in the black. Ironically, if market headlines are to be believed, the fall was in reaction to stronger employment figures released last Friday, where the market is now thought to be concerned that the jobs figures are too good and will force the central bank to raise interest rates faster and higher than predicted. 

By applying perspective, one must remember that the U.S. jobs figures showed the highest wage growth in eight years, not the weakest. So, it seems rather ironic that it would be the catalyst for investor panic, as it is something the market had desired for so long. This highlights how hard it is to explain sentimental shifts and reinforces the need to focus on valuations.

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Dan Kemp

Dan Kemp  is Chief Investment Officer, Morningstar Investment Management EMEA

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