The Great Fall of August 5
- Market Plunge: Dow Jones down 1033 points, S&P 500 down 3%, NASDAQ down 3.43%.
- Global Shockwaves: Japan’s Nikkei down 12.40%, sparking worldwide market turmoil.
- Future Forecast: Possible long, slow grind to new lows; gold and bonds poised for gains.
August 5, 2024. A day that hit Wall Street like a freight train.
The Dow Jones Industrial Average took a nosedive, plunging 1033 points—down 2.6%. The S&P 500 and NASDAQ weren’t far behind.
Even gold dipped to $2,455 per ounce. Interest rates cratered, and the dollar index slid. It all started in Japan, sending shockwaves through China, India, the Middle East, and Europe.
By the morning of August 6, the markets seemed ready to claw back, but the question lingered: how long could any recovery last?
The real carnage began in Japan. The Nikkei didn’t just drop; it crashed—12.40% in a single session. Historic. Catastrophic. In comparison, the U.S. markets’ significant losses looked like a minor stumble.
What’s Next?
1. Not the Big One, But…
This is not the catastrophic crash some might fear. A 25% or more drop in a few weeks is always a possibility, but this correction may stabilize as the “buy the dip” crowd steps in. This doesn’t mean a sudden rally, but a gradual finding of a new bottom.
2. A Long, Slow Grind
A more daunting scenario is a prolonged decline, possibly reaching a 70% drop from the peak, reminiscent of the 1929 crash that took until 1932 to bottom out, or the stagnation of the 1970s. Be prepared for a lengthy recovery.
3. Gold’s Path
Gold often dips initially in a crash due to liquidations but tends to recover and hit new highs. Expect gold to rise above $2,500 per ounce, aiming for $2,750 and even $3,000 in the coming months.
4. Treasuries: A Safe Haven
The bond market rally is expected to persist, with yields on the 10-year Treasury note headed back toward 3.0%. Buying Treasuries now locks in attractive returns and capital gains as yields decline.
5. Federal Reserve’s Dilemma
The Fed is likely to cut rates in September in response to market turmoil and rising unemployment, but this could lead to stagflation—high inflation and recession simultaneously.
6. The Bigger Picture: Economic Recession
The recession is here. Unemployment is rising, inventories are excess, and credit is tightening. This economic downturn could be severe and prolonged, aligning with forecasts of a slow, painful decline in stocks.
7. Political Ramifications
This market chaos plays into Trump’s hands, rekindling voter nostalgia for his pre-COVID era. The Harris-Biden honeymoon might be over as voters reassess their choices.
In these turbulent times, one might take a page from Warren Buffett’s playbook. His recent liquidation of Apple stock and the substantial cash reserves Berkshire Hathaway holds underscores a critical strategy: cash is king,
Freedom Financial News
