Dow Jones managed to add 100 points after experiencing the worst day in months since the pandemic due to Evergrande’s fiasco. The stock market started showing signs of recovery as soon as the news of vaccines’ approval spread far and wide. Experts are confident that this will be a minor setback and the market will recover very soon as the COVID-related measures are being eased up.
The recovery is still a small fraction of the total that the investors lost. What trigger the drop in the first place was Evergrande’s announcement of it being unable to pay the $85 million loan installment for this month, due on Thursday. This has sparked one of the biggest sell-offs in the market.
In July, Dow Jones experienced the worst dips in a single day by plunging 615 points, but the Tuesday reports have shown the progress of up to 118 points i.e. 0.4% rise during the opening. This increase is just 5% less than what Dow Jones saw as an all-time high in the last month.
Apart from this as the financial and energy stocks are rising, S&P500 and NASDAQ also ticked an increase of 0.4% on Monday’s opening report after seeing a heavy decline since May, which was 1.7% for S&P and 2.2% for NASDAQ.
This made the Chief Global Strategist of JPMorgan, Marko Kolanovic believe that the market will rise. He said that Monday’s sell-off was nothing more than just an “overreaction” of the rattled traders. In fact, he has forecasted that S&P could rise by another 9% by the end of the year.
Moreover, according to Marko, the Russell 2000, an index of corporations where companies will limited market cap, has shown a positive long-term uptrend. This will prove beneficial for the market in the longer run. However, he believes it is only possible if the small-cap stocks lead larger indexes generally.
Kolanovic further adds, “As long as Covid continues to ease, strong momentum should continue into 2022 as businesses start to rebuild depleted inventories and ramp-up [spending], Central bank policies should remain growth-oriented, and even China’s slowdown is likely to be countered soon with a policy pivot.”
Evergrande is the second largest Chinese real estate company that has over $300 billion in debt, which the company used rather recklessly in its various real estate portfolios since it was founded 15 years ago.
The news that Evergrande would not be able to pay this month’s loan as it is struggling to run its operations. The news led to a downfall in the company shares, which barely affected the US stock exchanges until last week. However, when the investors realized that it will create a ripple effect on the market, they panicked which took away 615 points from Dow Jones.
