The Dow Jones Industrial Average Index suffered its 6th largest fall in absolute terms on Friday (February 2, 2018) but the fall was just 2.5% which isn’t even in the top 100 falls in percentage terms.
Everyone has become so used to the markets going up that the headline on the 30th of January on BBC Business was “US stocks fall for second consecutive day” (click here to read the article). Two consecutive days of falls is now such a big thing! As we noted previously here market volatility was almost dead in 2017. And most 2018 S & P 500 targets were reached in just 15 trading days (we covered this here). Surely, some volatility can’t be so bad?
Meanwhile, Bank of America, JP Morgan Chase, Capital One and Discover have restricted cryptocurrency purchases on credit cards in the US. Just to understand how crazy the cryptocurrency mania has become look at Google Trends for “Buy Bitcoin with credit card” (click here for Google Trends). It appears that a large percentage of people were either buying or looking to buy cryptocurrencies on their credit card while prices were moving up. Now that the price trend has reversed card issuers are looking to restrict purchases. Have card issuers and regulators been too late to react?
For the record, US revolving credit was up 13.3% in November and 9.9% in October (as against growth of 6.6% in 2016 and 5.4% in 2015) as per the Federal Reserve. Were a lot of people in the US using their credit cards to buy cryptocurrencies or were people borrowing on their cards to spend any tax cut gains in advance? Time will tell.
“Nobody comes here anymore, it’s too crowded” – Lawrence Peter “Yogi” Berra