On Monday, August 24, 2015, the markets opened to quite a shock. The Dow dropped substantially and many investors freaked out. There is wide speculation as to the cause of this dramatic drop, and the market was so concerned about this development that it enacted Rule 48, which allows market makers to not be required to “disseminate price indications before the bell.” This makes it easier and more efficient to open stocks.

This disruption was likely caused by a variety of factors and players in the market, each with a different level of impact.

The Chinese Stock Market and the Yuan’s Devaluation.

Over the summer, the Chinese market has struggled. The Chinese government has responded to this struggle by trying to influx capital and ensure certain protections are maintained. On Monday the Chinese market fell again by 8.5%. A fall of this size has not occurred since 2007. Since that time the Chinese market has been growing at an alarming rate. This growth rate was bolstered by average Chinese citizens taking out loans in order to invest in the bullish Chinese marketplace, a major risk that became apparent over this summer. The slowdown in the Chinese economy and the subsequent slowdown in the U.S. markets highlights the ever-growing connectivity between major markets in our world today.

Europe’s Sluggish Markets and the Greece Crisis.

While America’s markets have been growing substantially over the past few years, the growth in the European markets has been markedly less. On top of that, the bailout of Greece and the difficulty of the negotiations leading up to a bailout agreement did not help the confidence of investors in the European market. On Monday a majority of European indexes dropped significantly.

The Fluctuating Oil Price.

This year has seen massive down, up, then down again swings in the price of oil. The price of oil recently dropped again. Oil has been a good benchmark for global activity and the fluctuating price has worried several investors. This oil fluctuation has not affect the wide variety of fracking companies in the U.S. as much as had been thought. The fall of oil prices is a mixed bag. On one hand, it contributes to worries about an overall market slowdown, but the cheaper price of oil also adds a bump to the economy, making the production of a variety of items cheaper and lowering the cost of travel.

The Market is Simply Correcting Itself.

A final theory is that after several years of bullish growth, the market is just coming to a slowdown. This in and of itself should not cause panic. A volatile market that continues to grow and grow is unsustainable. The old idiom applies – what goes up must come down.

No matter what trends the market takes, you can rest assured that Cambridge Realty Capital is prepared for what comes next. Our long-term view ensures that we will represent your interests holistically and with the future in mind.

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