Flash Crash

US equities experienced their largest point drop last night since the Financial Crisis. Markets have been under pressure after a strong rise in January which, was ended on Friday by stronger than expect US jobs data and wage growth figures.

Markets are concerned that this will see the Fed raise interest rates faster than expected. The scale of drops on Monday the 5th of February however seem to have been exacerbated by a second flash crash, not unlike the events of 2010 that saw the S&P 500 lose as much as 10% of its value before rapidly recovering.

It is not yet clear if this crash was caused simply by too high a volume of orders or if there was any malicious intent to manipulate the market.

It is our view that the drop in the market is ultimately a healthy pullback caused by profit taking from one of the biggest bull runs the market has seen since the 1980’s. Current losses have only erased gains made in January 2018.

The market may pullback by as much as 10% from highs and this represents a good time to buy.