U.S. Stocks Drop to 20-Month Low

• U.S. Stocks Drop to 20-Month Low

Growing uncertainty in the U.S. amid government shutdown continued to weigh on equities as investors look to safe haven for safety.

The S&P 500 dropped for a fourth straight day on Monday to trade at 19.8 per cent below its September high and the lowest since April 2017, nearing the worst monthly drop since the recession in 2008.

Investors had hope President Trump would ensure stability in the financial market following a report that the president was discussing possibility of firing Central Bank Chief Jerome Powell last week, however, despite Treasury Secretary Steven Mnuchin reassuring market participants that the president does not have the autonomy to fire federal reserve chair and called a crisis meeting with top financial regulators to discuss the almost three months stock rout, President Trump on Monday blasted the Fed via his twitter handle, saying the Central Bank is responsible for current economic problem.

“The only problem our economy has is the Fed. They don’t have a feel for the Market, they don’t understand necessary Trade Wars or Strong Dollars or even Democrat Shutdowns over Borders,” Trump said in a tweet Monday. “The Fed is like a powerful golfer who can’t score because he has no touch – he can’t putt!”

The tweet erased whatever confidence traders have in the market going into the new year, especially with the government already shut down and likely to remain so into the new year.

“Any kind of disciplined market-friendly messaging from the White House has gone out the window,” said Ernesto Ramos, head of equities at BMO Asset Management. “It’s all related to politics and the fact that the market’s figuring out there’s very little in the way of consistency and discipline.”

Still, global trade war, rising borrowing costs and slowing global growth are some of the factors hurting business confidence going into the new year and the reason stocks of businesses that depend on exports are not so attractive.

The story is not different in the Euro-area where businesses are already concerned about possible rate increase in the new year following years of zero interest rates. Investors and companies are worried consumer spending and new job creation will suffer if the European Central Bank go ahead with normalization planned for 2019.

The Stoxx Europe 600 Index declined by 0.4 per cent to the lowest in more than two years, while the MSCI All-Country World Index dropped 1.4 per cent. The emerging market gauge declined by 0.5 per cent to the lowest in almost eight months.