7 Reasons the Stock Market Is Selling Off

It has gotten downright ugly out there.

Trading screen financial data in red. Selective focus. Focus is appx central.
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It has gotten downright ugly out there. The Standard & Poor’s 500-stock index has been dancing in and out of correction territory and is down about 8% from its all-time highs at time of writing. It’s also barely in positive territory in 2018.

It doesn’t get any prettier when you look at other corners of the market. The tech-heavy Nasdaq is up a meager 4% in 2018, but of more concern is that it’s down 12% from its late-summer highs, putting it well into official correction territory.

And when you drill down to the major players that have led the bull market in tech shares for years – the “FAANG” stocks Facebook (FB (opens in new tab)), Apple (AAPL (opens in new tab)), Amazon (AMZN (opens in new tab)), Netflix (NFLX (opens in new tab)) and Google parent Alphabet (GOOGL (opens in new tab)) – it’s a bona fide bloodbath. Facebook has lost more than a third of its value from its highs, and Netflix isn’t far behind. Apple has been sliced by a quarter. Amazon has shed nearly 20% of its value, as has Alphabet.

The picture doesn’t get prettier overseas. Chinese stocks are in an official bear market, and the iShares MSCI EAFE ETF (EFA (opens in new tab)), a proxy for developed international stocks, is flirting with bear-market territory.

We know it’s ugly out there; the question is why. The first-quarter selloff shook out many of the less committed holders, meaning remaining investors should have been a little harder to rattle. And earnings still look strong, as does the health of the economy. So, what gives?

It’s rarely just one thing. Selloffs almost always have multiple, sometimes overlapping, drivers. Here are seven of those reasons – including which ones could threaten the market further.

Charles Lewis Sizemore, CFA
Contributing Writer, Kiplinger.com

Charles Lewis Sizemore, CFA is the Chief Investment Officer of Sizemore Capital Management LLC, a registered investment advisor based in Dallas, Texas, where he specializes in dividend-focused portfolios and in building alternative allocations with minimal correlation to the stock market.