As per the statistic figures recorded as on October 17th, 2016, the US stocks witnessed a heavy fall owing to the dual effect of an imminent acceleration in inflation and weaker trading of crude oil in the country that was as low as $50 a barrel. The Dow Jones Industrial Average recorded a fall of 0.3 % or 51.98 points down to 18,086.40, with additional recorded losses of 1.47% from the shares of McDonald’s Corp. Apart from this the Nasdaq Composite Index finished off at 5199.82 by going down 14.34 points or 0.3 %. With the energy and consumer discretionary sectors being two of the largest contributors towards its losses, the S&P 500 index finished off at 2,126.50 after slipping 0.3% or 6.48 points from the previous figures.
Predictions and strategies
In a recent interview with CNBC, the founder of DoubleLine Capital LP, Jeffrey Gundlach emphasized the need for incorporating fiscal policies in fixing the instability of the volatile economy of the present times. He further added that the shift in the financial strategies by the policy makers would lead to an acceleration in the inflation and encourage the individuals to shift their radar from equities towards more stable forms of investments. He also remarked that the consumer discretionary stocks should not be included in this fiscal policy strategy as they tend to be highly sensitive to a sudden surge in prices. In addition to this, the Bank of America chief investment strategist, Michael Hartnett also made a cautionary statement against the probable inflation and suggested the investors to safeguard their money against the rising prices by shifting their focus to more secure real assets such as commodities and properties.
The shift in focus
As a direct repercussion of the inflation warning, the investors have already begun moving towards more secure stocks, which was visible on the S&P utility sector that finished off as the strongest performer of the day with a 0.6% rise in the figures. Commenting on the soaring current valuations, the Southwest Securities managing director Mark Grant remarked that with little chances of resuscitating the stock market in the last two months of this year, they are likely to witness a similar scenario of falling profits for another quarter or so. The Seaport Global Securities LLC macro strategist Richard Hastings also stated his prediction that the market is likely to be dominated by the bears until the sudden inflation subsides.