WASHINGTON: A selloff that rocked stock markets around the world is clouding the outlook for investors looking to buy stocks on the cheap, as worries about the US economy and disappointing technology gains threaten further losses.
A two-day rout late last week left the S&P 500 a new card nearly 6% off its July high, while the tech-heavy Nasdaq Composite (.IXIC) is opening a new card of extended losses to make its first 10% correction from a record high. from early 2022. Stocks also fell in Europe and Asia, with Japan’s Nikkei losing nearly 5% for the week.
The market slump presents a dilemma as another week of trading is set to unfold. Stock jumps during periods of weakness have rewarded investors over the past two years, as the S&P 500 has rallied about 50% from its October 2022 low.
But bearish buyers risk being overrun if recession fears rise after last week’s series of alarming US data. According to Truist Advisory Services, the S&P 500 has fallen an average of 29% during recessions since World War II.
Saturday’s earnings report from legendary investor Warren Buffett’s Berkshire Hathaway may also give bargain hunters pause: The conglomerate sold about half its stake in Apple ( AAPL.O ), opens a new tab, and let its second-quarter cash soar to $277 billion. Berkshire often lets cash pile up when it can’t find entire businesses or individual stocks to buy at fair prices.
“People are starting to reassess what their risks are and whether they’re properly positioned.” said Mark Travis, portfolio manager at Intrepid Capital, also noting that elevated valuations are giving investors pause.
Stocks have risen this year in a rally fueled by excitement over artificial intelligence technology and the so-called Goldilocks economy, where growth has remained resilient while inflation has cooled.
