The FTSE fell below 5,000 today taking the continued decline into its seventh day and dropping below this critical barrier for the first time since early July 2010.
On Friday we reported that the FTSE 100 plunged below the 5,300 mark amid escalating concerns over the eurozone debt crisis and the overall strength of the global economic recovery.
Today the picture is no less reassuring with much of it spent well below the 5,000 mark having slumped to as low as 4,796 within a few hours of opening. At this low point of the day the FTSE was over 1,000 points lower than at the start of August, equivalent to a reduction of 17.5% in just over six trading days.
Unfortunately the weekend brought no relief whatsoever with the global economic outlook continuing to deteriorate, particularly across the Atlantic.
US downgrade
The news that the US had been downgraded by credit rating agency Standard & Poor's meant an end to the country’s 70-year AAA rating and due to its unprecedented nature, brought with it great uncertainty as to how this would be received by the markets.
Jim Leaviss, Head of Retail Fixed Interest at M&G, comments “Friday’s downgrade of the US appeared to come as a surprise to many market participants and commentators – even though the writing had been on the wall for some time.”
However, despite President Obama’s attempts to calm investors’ fears the impact was stark with the S&P 500 and the Dow Jones down 6.66% and 5.55% respectively overnight, the biggest one day losses since October 2008.
Europe and the Far East
Investors concerns about how Europe and the US will work their way out of a high debt burden if the global economy slows were also echoed closer to home, with leading indices in Germany and France seeing significant falls.
The Far East was also unable to buck the trend with similar losses in Japan and Hong Kong thus confirming yet again that this is truly a global crisis of significant scale and that short term prospects are difficult to predict.
Investors face tough decisions
With such serious drops as these both in the UK and overseas and with the let up of relentless bad news and industry speculation nowhere on the horizon, these are difficult times for investors who are facing tough decisions.
Direct exposure to this market volatility via individual shares or investment funds will have provided investors with sharp losses. Throw into the mix relatively low fixed rates available on cash savings and producing real growth on your savings and investments over and above inflation is perhaps as challenging as it has ever been.
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