Expert explains the stock market crash "Some people have probably lost their nerve"

Stock markets around the world have been in a nosedive for days - what are the reasons for the deep red figures? An expert assesses the situation.

The publication of the US economic data has made waves on the stock markets. The weak US labor market in particular is said to show that the US economy is weaker than expected.

The new data has triggered panic in recent days. The fear of an economic downturn in the USA and a possible recession has now spread worldwide. This is also reflected in the stock market indices.

"We don't see a recession"

"The economy is slowing down, but it is not going into recession," says Christoph Schenk, Chief Investment Officer at Zürcher Kantonalbank, to blue News. Some investors are now panicking after the latest data because the US central bank, the Federal Reserve, has not yet lowered interest rates.

According to Schenk, however, the slowdown in the economy is precisely the idea of fighting inflation: "Interest rates are going up so that the economy slows down. Unemployment increases. Inflation goes down and the central banks can lower interest rates again." Europe is slowly recovering from this and the situation in China has already stabilized again.

The market is no longer used to fighting inflation, which takes a little longer. "Some have probably lost their nerve," Schenk continues. He does not expect a recession in the US economy. Not every fight against inflation would lead to a recession, "that is the normal course of the cycle".

The upcoming US elections in November, the elections in France or the situation in the Middle East would also influence the market. "In real economic terms, this has no influence at all, but the market does not like additional sources of uncertainty."

"The Japanese market has not performed"

Japan has been hit the hardest these days. A drop of almost 13% was recorded there. "There are players speculating on further rises, such as hedge funds. There were also private investors who had products with a leverage effect," says Schenk.

There was speculation that the market would rise by 1% and the leveraged products would then rise four times as much. "But they also go down again in the same way," which then leads to short-term panic intervention and market overreactions.

These speculative investors would always be hit the hardest because they think the trend will continue.

The Japanese market has not experienced such a fall in prices since 1987, but Schenk also puts this into perspective: "The stock market in Japan has not performed in the last 30 years. It has never risen, which is why it has never crashed".

Investors should persevere

During the same period, a lot has happened on the stock markets in the USA and Switzerland. These movements always bring with them rapid counter-movements.

This is also the reason why Schenk advises investors not to do anything in the current situation. "You just have to look at the fundamentals and they're not that bad. If you have a good, diversified portfolio, you just have to hold on a little."

Government bonds are safe investments

The slump in the price of Bitcoin was also striking. "Although Bitcoin, as the name suggests, is supposed to be a coin, it is not a currency like the Swiss franc or the US dollar," says Christoph Schenk. These currencies have a stable political system behind them and represent the national economy.

This is not the case with Bitcoin because it is a technology from the computer industry and is just as vulnerable as other tech stocks. "These are speculative positions by people who believe it will go up, but they have no economic backing."

"Now that uncertainty about the future has increased, everything that is more speculative than Swiss government bonds, for example, is suffering," concludes Schenk. Those who invested in government bonds are now among the few winners.

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