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Why Stock Markets Fell on March 22

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Mar. 26 2019, Updated 9:49 a.m. ET

The Nasdaq Composite Index fell 2.5% on March 22

After rising for most of last week, the tech-heavy Nasdaq Composite Index (QQQ) fell 2.5% on Friday, March 22, erasing all the gains of the previous sessions in the week and marking the second weekly decline on the index in three weeks.

The Nasdaq and broader markets have been rising for most of this year, ignoring the obvious risks that we discussed previously. Stocks plunged on Friday, as there were even more signs that the global economy, especially the developed markets, are slowing down.

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Declining yields indicate investors are anxious about risk assets

Germany has avoided a recession, but stagnant growth caused the ten-year German Bund yields to fall below zero, a sign that investors are resorting to safe securities.

The ten-year US Treasury (IEF) is now yielding 2.44%, down 32 basis points from the start of March, suggesting that investors are hedging their equity exposure with safer bets, which has caused equities and safe havens like Treasuries to move in the same direction this year, a rare scenario.

The US economy is still showing some positive signs including decent growth in the job market. However, Europe and China are showing more signs of slowing down. Many blue-chip US companies depend on these regions for growth.

This week will provide more clues about the global economy, as the UK, France, and Canada are all reporting their Q4 2018 GDP readings, while the US is releasing its revised Q4 estimate.

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