Investors have been concerned as the markets have seen an overall decrease in value over the past month, particularly with technology stocks with the Nasdaq down 3.3%. However, that decrease has been far less noticeable in other sectors such as pharmaceuticals and transportation, which means that the market hasn’t yet seen the uniformed sell-off that normally marks a major crash.
Markets generally experience periods of volatility, and economist / market analysts often use these situations to judge how prepared investors are for a major market crash. Though it’s clear that the markets are feeling some stress, analysts are hopeful that current market conditions are not indicative of a crash. As Goldman Sachs puts it in a recent report, “market pricing [is] more an indication that investors [are] exercising some caution rather than panic selling”.
This cautious optimism is, in part, due to improving economic readings from the US which are proving to be much higher than expected. The strong job report from last Friday, the tightening of jobless claims, and the flat rate of inflation all point to a steady rate of economic growth, which is unlikely to trigger a collapse in the stock market.
This isn’t to say that the markets are entirely safe — market shocks, such as the recent decline in bond prices led by the Fed’s annual stress tests, can still throw a wrench into the economic machine. But for the most part, analysts believe that despite the current turbulence, the markets have stress fractures, but no clear breaks in sight.