Financial Services

Why this market selloff isn't like the correction at the beginning of the year


Market experts cited a slew of factors that are contributing to the downdrift: fear the Fed will raise interest rates aggressively, worry form tech companies that tariffs on Chinese imports will drive costs higher, and even the upcoming earnings season as expectations fall for corporate profits.

Combine that with programmed trading and it gives rise to some of the panic selling the market went through Wednesday.

“People are taking cover,” said Quincy Krosby, chief market strategist at Prudential Financial. “One of the things that helpful is when you’re pretty negative going into earnings season, then positive surprises do help. The shorts have to cover.”

Another earnings factor that could be positive is share buybacks. Krosby said companies have announced aggressive plans for repurchases but haven’t executed them fully. Lower prices would encourage more buybacks.

Back in February, the backdrop of sound fundamentals along with companies’ willingness to support their own shares helped the market recover and pave the way to a healthy bounceback that saw major indexes recently eclipse all-time records.

At least for now, there’s optimism that this drop also will be met with more buying, so that would be the one way the two periods resemble each other.

“I don’t think [the past week’s selloff] is something more fundamental,” said Brad McMillan, chief investment officer for Commonwealth Financial Group. “A good example is at the end of January and the beginning of February, we saw the market get ahead of itself and we saw the air come out. Once we saw the market consolidate, then we saw an upward move.”



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