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What To Make Of Monday's Market Selloff

January 5, 2016 9:17 am
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Many people believe in the old adage “start the year as you mean to continue,” but traders around the world are hoping that doesn’t apply in the case of share markets.

On Monday, when markets reopened after the New Year holiday, shares tumbled, leaving investors to wonder whether 2016 was going to be a turbulent year. The decline has caused some worries about stability moving forward, but some are using this as an opportunity to buy.

Reliable Stocks Lose Their Footing

One of the biggest concerns for traders, according to the Wall Street Journal, were losses in some of the S&P 500’s biggest names that typically deliver returns even in times of trouble.

Tech giants Amazon.com, Inc. (NASDAQ: AMZN), Alphabet Inc(NASDAQ: GOOG) (NASDAQ: GOOGL) and Facebook Inc (NASDAQ: FB) lost 5.5 percent, 2.9 percent and 3.3 percent, respectively.

The losses suggest that traders are beginning to lose confidence in last year’s market darlings, a sign of weakness in the broader market.

Related Link: Traders Are Bearish For 2016

Fear In The Driver’s Seat

The COBE Volatility index rose above 20 on Monday, an 11 percent increase. That index measures the level of concern investors feel within the market, and the dramatic rise suggests that there is a high level of fear within the markets.

Many believe investors have begun to worry about the Fed’s interest rate rise, as well as speculation that some of the market’s current valuations are too high. However, one of the major causes for uncertainty has been China, where Beijing is struggling to kickstart the nation’s struggling economy.

Relax And Invest

While Monday’s losses were certainly harrowing for some, others say markets are overreacting, cites CNBC. China has been volatile for some time, and despite major swings in the Chinese markets, the United States has continued to thrive. That means that now, as big names like Microsoft Corporation (NASDAQ: MSFT) and Amazon suffer from panicky traders, could be a great time to buy into stocks that were previously too expensive.

Image Credit: Public Domain

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