The Dow Jones is down by merely 3.5 percent from its record high achieved in July and is up 16.3 percent year-to-date.
In a letter sent to investors, Sam Bullard, the managing director and senior economist at Wells Fargo Securities, stated that major economies in the likes of Germany and Australia have shown signs of short-term decline, which may possibly fuel the slowdown of global economic growth.
However, Jim Paulsen, the chief investment strategist at Leuthold Group, emphasized that the rising “fear bubble” in the U.S. equities market and the Dow Jones could result in buying opportunities, leading to overall market recovery.
Are investors overreacting about the Dow Jones and U.S. stock market?
Nine months have passed and the trade deal between the U.S. and China has not seen sufficient progress since the start to the year in January.
The U.S. has threatened the imposition of additional sanctions on Sept. 1 and China fired back with sanctions on $75 billion worth of U.S. goods, adding to the tension between the two economies.
Following the placement of new sanctions by China, Xinhua, a state-run news agency in China, reported:
“The United States should learn how to behave like a responsible global power and stop acting as a ‘school bully.’ As the world’s only superpower, it needs to shoulder its due responsibility, and join other countries in making this world a better and more prosperous place. Only then can America become great again.”
As the dispute between the U.S. and China intensifies, a growing number of investors are expecting more uncertainty in the global economy despite the strength the Dow Jones has demonstrated throughout the past three quarters.
According to Paulsen, the noticeable change in stance from the broader market of investors could indicate that the long-lasting recovery of the Dow Jones is possibly coming to an end. But, the strategist noted that a recession at the current juncture of the market remains highly unlikely.
“We’ve grown slowly close to the 2% stall speed we used to worry about the entire recovery. We’re at full employment with 4% unemployment. We’re in the longest recovery ever now in U.S. history. So there are certainly characteristics of being near the end. But character wise, I just don’t see the overextended nature mainly because we’ve been so conservative,” he said.