By going from 8,000 to 7,000 points in the space of ten days, the CAC 40 like all the stock market indices on the planet have, to say the least, experienced a turbulent moment. Is it a stock market crash? What is the trigger? Is this the end of the financial world as we knew it? Here are some answers to understand this unprecedented situation.

Can we talk about a stock market crash?

It must be recognized that for the past week, opinions have diverged among specialists so I'll let you make up your own mind. Generally, a stock market crash is associated with the bursting of a speculative bubble that has driven market prices to very high levels before falling with a bang during the explosion.

Here, the markets fell sharply but without any link to any bubble.

So what was the trigger?

I'm not telling you anything, it's the President of the United States, Donald Trump! Indeed, even though the introduction of customs duties had been announced during the presidential campaign, the scale of these duties as well as the number of countries concerned were surprising. If there has been such a reaction from the markets, it is simply because in a globalized economy, international trade is at the heart of the economic model of most companies. A slowdown or even a halt in these exchanges would inevitably have an impact on the results of many companies around the world, especially the largest of them. This is why the suspension of the increase in customs duties has caused such a rebound in the markets.

Is this an upheaval in the financial world?

For this to be the case, these policy decisions would have to lead to a major change in business investment and development strategies. Today it is too early to say since nothing seems set in stone. However, it would seem that "protectionism" is being considered by a greater number of leaders. If such policies were put in place, it would certainly reshuffle the cards. For good, for bad? It is impossible to say for sure.

In any case, Donald Trump has decided to change the rules of the game and this will have consequences in the United States but also throughout the world given the central place of the American economy.

What lessons have been learned from these sudden changes in the markets?

Financial markets are directly linked to economic and geopolitical conditions. Every decision taken, every word of the president, can, as we have seen, provoke brutal reactions on the financial markets.

Some indicators can, from time to time, give warnings about upward or downward changes in the markets. However, these are only indicators and it is often difficult to predict the magnitude of a reaction.

The key words in financial investments are patience and the investment horizon. Exiting the markets precipitously when a decline is underway is generally counterproductive for investors, as positions are not taken over at the right time for the rebounds. It was then that losses were noted.

In this changing environment, it is more important than ever not to react precipitately. Finankap Group's financial advisors are at your side to advise you and allow you to make the appropriate decisions according to the situation, do not hesitate any longer, Contact us!

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