The U.S. stock market is off to its worst-ever start of a new year.
After falling 1.2 percent Thursday, the S&P 500 is down 10.54 percent in the first 28 days of trading. That’s the biggest fall to the start of the year ever, according to Bespoke Investment Group, an independent research firm. Previously, the biggest decline over the first 28 days of trading was the 9.22 percent fall at the start of 1948.
What’s going on? For a start, oil prices dropped to a new 12-year low on Thursday before rising after news that oil producing countries were ready to cut production. That news caused stock markets to spike briefly. "Right now financial markets are all about oil prices," Business Insider's Myles Udland wrote on Thursday.
Then there’s the Federal Reserve. Fed Chair Janet Yellen testified Thursday in Washington that she is ready to re-examine the central bank’s ability to use negative interest rates -- an extraordinary tool that flips the normal dynamic and charges, rather than pays, depositors -- less than two months after the Fed raised interest rates after six years of keeping rates at zero.
There’s also the now omnipresent fear of China. The country's bad loans could top $5 trillion and end a credit bubble that “has directly or indirectly impacted nearly every asset price in the world,” Charlene Chu, a Hong Kong-based analyst for Autonomous Research, told the New York Times.
And of course, there’s a chance that looking at fearful markets makes traders fearful. The Financial Times’ John Authers thinks we may be seeing the end of the belief that the U.S. economy can keep chugging along while growth in the rest of the world is slumping, which puts pressure on the Fed, which causes bank stocks to sink, which… You get the idea.
In this context, it’s no surprise that gold, the price of which tends to increase as fears grow, rose five percent to its highest level in a year.