Money Matters - Simplified

US markets continue plunge amid fears of nuclear crisis

The investors are getting ready for even steeper plunge in the market as the fear of the outcome of the nuclear crisis in Japan worsens.

Japan crisis loomed large on the U.S. markets as they continued their downward trend for the third consecutive day. The political turmoil in Bahrain and weak report on the housing sector also contributed to the loss.

The investors continued selling stocks and investing in Treasury bonds which are considered as safe investments.

Investors fears highlighted
The investors also did not favorably react to the advisory issued by the U.S. officials to military personnel and other Americans present in Japan to stay away from the broken down reactors.

These were taken as a sign of further deterioration in the situation in Japan.

Investors feared that if Japan could not contain the nuclear disaster soon, it could affect the present economic recovery in the United States.

The Standard & Poor’s 500 index plummeted by nearly 2 percent in the day to reach 1257 and is still at a down for this year.

Chief market strategist with the LPL Financial, Jeffery Kleintop, said in a report titled 'Aftershock' on Wednesday, “Markets could plunge if the worst fears come to be realized.”

A correction in the market?
With the continuing downward trend, the market experts are also talking about a correction impending in the market which could lead to up to 10 percent fall.

Chief U.S. Equity Strategist at BoA Merrill Lynch, David Bianco, enumerated ten reasons why investors should “buy the dip” instead of shying away from the market.

Bianco listed among these reasons, the attractive valuations on stocks, and the decreased chances of the energy price shock because of the slower growth after the Japan disaster.

Bianco pointed out that selling stocks at the first signs of trouble in the hope of buying these back at a lower price has hardly ever been a profitable business.

His analysis is focused on the “panic selling” strategy under which the investors start selling their stocks after a drop of 2.5 percent and remain away from the market for roughly 20 before buying back.

This strategy may sometime help in avoiding the worst days of the market but it ends up with the investors getting lesser return, when compared to those who decide to go by the buy and hold policy.

Markets could plunge further
The investors are getting ready for even steeper plunge in the market as the fear of the outcome of the nuclear crisis in Japan worsens.

Chief market strategist with the LPL Financial, Jeffery Kleintop, said in a report titled 'Aftershock' on Wednesday, “Markets could plunge if the worst fears come to be realized.”

Meanwhile, the debate continues if the investors should hold on to their stocks or sell them to escape further losses.