Several factors led to Thursday’s drop in the US markets, which dragged down the New Zealand stock exchange (NZX) in early trading yesterday, and again today

Among the triggers are:

· Rising US interest rates, which have been worrying investors.

· Fears the higher price of oil may affect business profits.

· There’s concern about where China’s economy is heading.

· The International Monetary Fund has warned of ‘dangerous undercurrents’ that threatened the world economy.

The drop in the US affected the New Zealand market. The NZX50 fell today for the ninth day in a row, as nervous investors reacted to the overseas markets.

Among the worst hit in the US were big players like Microsoft, Amazon, and Nike. Tech stocks in particular felt the pain. They tend to rise more rapidly than other sectors when the markets are up – and fall more rapidly when it drops.

Many fund managers have been holding higher levels of cash than usual in case of a market drop, after the longest bull market in modern history.

Mike Taylor, the CEO of Iocal fund manager Pie Funds, said his investment team had been anticipating a correction in the market, so it had been holding higher cash levels. He said this strategy was one of the benefits of active management.

First published 11 October 2018

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