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On 29 December 2015, the S&P 500 Index (SPY) hit a short-term high of 2,078.36. In the 10 days since then, the index has only shown brief bullishness when it rallied on 4 January to 2012.66, and 2,016.71 on 5 January. However, that has been the extent of the positive performance for the index which is now at a level of 1,922.03 for a loss of -1.08% on Friday, 8 January 2016. This particular index has a 52-week high of 2,134.72 and a 52-week low of 1,867.01. 2016 has started off in the worst possible fashion for the S&P 500 index, with a year-to-date return of -5.96%. Binary options traders who went short on the S&P 500 index will have been handsomely rewarded for their efforts.
Why is the S&P 500 index in the red?
As is so often the case in recent memory, China is front and center in many of the world’s problems. In fact, so dire is the state of the global economy that this is the worst possible start to a year for the S&P 500 index ever. There have been some positives in the mix, with the price of gold breaking through important psychological barriers, before retreating once again. The Japanese yen – another source of strength in Asia has also benefited from China weakness. However, ominous undertones remain as heavyweight investors like George Soros caution that another global catastrophe is being cooked up. To date we have seen some $2.5 trillion wiped out from global equities markets in just a few days.
The first 4 days of 2016 saw the S&P 500 Index plunge by 4.9%. The all-important DJIA also shed 900 points in 2016, and global shares ended a horrific 4-day run, down 5.2%. A big part of the problem is China. That the People’s Bank of China decided to weaken the CNY is evidence that there are deep cracks in the Chinese economy – deeper than most analysts, investors, traders and economists are aware of. China is attempting to make up for its plunging export figures by weakening the renminbi so that Chinese products are much cheaper on global markets. Along with weakness in China is weakness in the price of Brent crude oil and WTI crude oil. Even metals like copper are hitting multiyear lows under $2.
