Why the ASX Is Down Today: A Quick Guide

By ,

Big blue chip stocks like BHP Billiton Ltd [ASX:BHP] and Australia and New Zealand Banking Group [ASX:ANZ] were hurt today as the ASX was down as much as 1.32%. This applies for both the ASX 200 and the All Ordinaries.

Here’s your quick guide to what happened.

Three reasons you should watch gold carefully. Read the free report now.

Bond yield curve inverts, weak manufacturing and services data

While some outlets are leading with the headline that poor European PMI data drove the sell-off, I believe the bigger story behind the sell-off is the bond yield curve.

Basically, the yield curve on two prominent types of bonds has turned negative for the first time since 2007.

We all know what happened shortly after that happened — the GFC.

Why the ASX is Down Today

Source: Bloomberg

In fact, this economic bellwether has preceded all nine US recessions since 1955.

At its core, the yield curve inverts when long-term bond yields are lower than short-term bond yields, in this case, three-month and 10-year Treasury bonds.

It means the short-term outlook for the economy is negative.

This shouldn’t come as a surprise to investors, as you can see the spread has been pushing consistently lower since 2016 and has picked up pace recently.

And yet, it still sent ripples through the market.

What should I invest in if equity markets are facing difficulty?

There are a host of options available to the savvy investor. For example, there are defensive stocks like Woolworths Group Ltd [ASX:WOW], and  Coles Group Ltd [ASX:COL].

People don’t stop buying groceries in a recession.

That being said, there is understandable excitement around gold and gold stocks. This last option, however, may need to be a short/mid-term play as gold stocks have also been hurt in the previous recession.

Last time, they spiked just before the recession as you can see in the GDX chart below (a gold miners ETF):

Why the ASX is Down Today

Source: tradingview.com

Something to consider.

If you are into the idea of gold, be sure to check out Greg Canavan’s report/research on the gold opportunity here. It’s free.


Lachlann Tierney,
For Money Morning

About Lachlann Tierney

Lachlann Tierney is an Analyst for Money Morning and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest…

ANZ Shares Dragged 2.5% Lower as Lending Market Tightens (ASX:ANZ)

The smallest of the Big Four banks, Australia and New Zealand Banking Group [ASX:ANZ], is having a rough patch today.

ASX 200 News: IOUpay, Life360, Paradigm, BHP & Woodside

The benchmark S&P/ASX 200 [ASX:XJO] is inching higher on Tuesday morning, propelled by a rebounding iron ore price which pushed the big miners Fortescue Metals Group [ASX:FMG] and Rio Tinto [ASX:RIO] higher.

Latest ASX 200 News: BHP, RZI, PAR, BRN, GL1 Shares in Focus

See what’s making news on the S&P/ASX 200 [ASX:XJO] this morning.

BHP Share Price: September Quarter Iron Ore Production Dips (ASX:BHP)

Iron ore production fell 4% year-on-year and 3% quarter-on-quarter.  BHP Group [ASX:BHP] share price are currently exchanging hands at $38.47 per share, a drop of 1.84% at time of writing.

Why ASX Small-Caps Are Back on the Investment Menu

At the moment, though, investors who love small-caps might wonder why their favourite playground on the ASX is so eerily quiet.

Rigged! How to Invest in the Lockdown Economy

‘Freeman points out that about 40 per cent of profits of companies on the ASX are generated offshore, insulating them from the worst of the lockdowns.’