Global markets tumble on first day of Davos

A fall in share prices across the globe raises concerns of a long-term bear market.

A global sell off of equities concluded on Wall Street today as investors dumped stocks for bonds amid fears of the arrival of a bear market.

The Dow Jones Industrial Average was down 2.85% at 1300 hrs Eastern Time, while the S&P 500 was down 2.75%. 

The falls followed similar behaviour in London which saw the FTSE 100 fall 3.46% at close and the earlier falls in the German Dax and French CAC 40 which were down 2.82% and 3.45% respectively.

It came on the first day of the World Economic Forum in Davos, where the world’s leading financial strategists were considering ’how to reboot the global economy’.

BlackRock’s chief investment strategist, Russ Koesterich, explained that investors are coming to terms with falling earnings and deteriorating conditions in credit markets.

He explained: “US small caps have entered a bear market. Biotech, a popular momentum trade, is down more than 30% from last summer’s high and stocks in China have suffered a mini bear market – down 20-% in two weeks.” 

During today’s trading, oil prices hit a 12 year low, fuelling further investor concerns about the likelihood of a prolonged bear market. 

The yield on 10-year Treasuries fell lower than 2% overnight. German and Japanese 10 year yields mean while at lower still at 0.54% and 0.2% respectively.

In its note to investors, BlackRock cited a report released by ratings agency Standard & Poor’s last week, which noted that three times as many companies are at risk of a downgrade versus an upgrade at the current time, the highest ratio since 2009.