This week in the markets
- The US stock market continued to decline Thursday after investors reacted negatively to meeting minutes from the Federal Reserve.
- China’s stock market also fell sharply on Thursday, hitting its lowest point since November 2014.
- Banks estimated that Uber could have a $120 billion valuation should it decide to go public. Experts say investors will ultimately decide Uber’s true value.
The stock market is still on a downward slope
October has been a spooky month for investors, with the Dow Jones Industrial Average (DJIA) and Standard and Poor’s 500 Index (S&P 500) each falling more than 4% and the NASDAQ down nearly 7%. This week's decline may be due to investors reacting negatively to the release of notes from the Federal Reserve’s September meeting, which indicated that the Fed was likely to continue raising interest rates. Investors may worry that the interest rate hikes enforced by the Fed will lead to higher borrowing costs, higher bond yields, and lower stock prices.
As we learned in this week's lessons in Lionomics, stocks and bonds tend to have a negative correlation. This means that as the value of one increases, the value of the other typically decreases. For this reason, it’s probably a good idea for investors to have both stocks and bonds in their portfolios. As a member of MoneyLion, you're invested in a number of carefully selected exchange-traded funds (ETFs), which are diversified among stocks and bonds as well as US and international markets to help cushion against market declines.
MoneyLion is here to guide your investments every step of the way and we want to help you stay on track to meet your long-term goals. Market volatility is normal, and historically the stock market has always continued to rise over the long haul. Although the stock market is currently down in the short term, it’s up significantly over the course of the past year. We encourage investors to focus on the future and remember nothing great was created overnight.
China's stock market also experienced a loss
The Chinese stock market hit a new four-year low on Thursday, possibly due to a sharp decline in the energy sector (oil stocks are down). This may be important to you because when the Chinese stock market falls, it also tends to impact US stocks. Market experts have noted that US markets are down about 70% of the time in periods when there are significant drops in Chinese stocks. A drop in the Chinese market often affects the stocks of US companies that produce commodities. A commodity is a basic good like grains, oil, and natural gas, commonly used in the production of other products. Although China is considered an emerging market and volatility in that region is not unusual, China’s stock market woes do concern some investors.
Uber got an outstanding valuation
Banks informed Uber that they estimated the value of the company to be $120 billion should the company decide to go public. Uber is currently a private company, meaning it’s not sold on any stock exchanges. If Uber goes public, it would have an initial public offering (IPO). During the IPO, the company would offer shares of Uber stock to the public for the very first time. With Uber's current estimated valuation at $120 billion, it would be worth more than double the average value of a company on the Nasdaq 100! However, the valuation may not be entirely accurate. If and when the company does decide to go public, investors will decide what the actual value of the company is. At the most fundamental level, supply and demand determine the price of a stock.
And now for your weekly Lionomics wrap-up. 🤓
Lionomics: Finance made easy
This week's lessons in Lionomics taught us that it's important to maintain composure in volatile markets. Volatility in the markets (like what we’ve experienced recently) is normal, and it's important to stick it out through the tough times to experience the pleasure of gains in your investment account. We also looked at the complementary relationship between stocks and bonds. When the price of one goes up, the price of the other tends to go down. That’s why it may be beneficial for you to have both in your investment portfolio.
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