Experts have warned that the volatility seen in global stock markets isn’t going to end anytime soon with numerous risks only exacerbating investor fears.
"I think the worst is yet to come next year, we're still in the first half of a global equity bear market with more to come next year," Mark Jolley, global strategist at CCB International Securities, told CNBC.
A bear mark is commonly defined as 20 percent or more off a recent peak.
U.S. stocks have fallen sharply in recent weeks on concerns over slowing economic growth and efforts by the U.S. Federal Reserve to tighten monetary policy, with the S&P 500 index on pace for its biggest percentage decline in December since the Great Depression and on the cusp of confirming it is now in a bear market. The Nasdaq has fallen nearly 22 percent from its Aug. 29 high.
Globally, Germany's DAX and China's Shanghai Composite have also entered bear market levels.
More generally, investors have fewer reasons to be optimistic now because the Fed tightening monetary policy means there will be less money for investments, said Vishnu Varathan, head of economics and strategy at Mizuho Bank.
"There is really no conviction for markets to buy back because they're not sure this is the bottom, and so they are thinking this is the proverbial falling knives," Varathan told CNBC's "Squawk Box."
To be sure, investors hoping for a last-ditch "Santa rally" found their stockings filled with coal on Christmas Eve.
A gauge of stocks worldwide posted an eighth straight decline on Monday as investors ignored Trump administration attempts to reinforce confidence and the U.S. president called the Federal Reserve the “only problem our economy has,” Reuters explained.
Investors, also facing the likelihood of a prolonged U.S. government shutdown, fled to the relative safety of bonds and gold during the first day of a week of trading shortened by the Christmas holiday.
On Sunday, President Donald Trump’s Treasury secretary responded to the ongoing selloff by calling top U.S. bankers and said he would convene a group of officials known as the “Plunge Protection Team.”
“There are a whole number of factors that have triggered this latest risk-off climate, including the Fed’s very modest deviation from its (rate increase) plan and the government shutdown in the United States,” said Investec economist Philip Shaw.
“We may get some clarity on several factors in early 2019, starting with a clearer line of sight on the prospect for a resolution in U.S.-China trade dispute, but until then, there are some nerves.”
Trump on Monday blasted the independent U.S. central bank, saying on Twitter that the “only problem our economy has is the Fed. They don’t have a feel for the market.”
Meanwhile, the U.S. Senate has been unable to break an impasse over Trump’s demand for funds for a wall on the border with Mexico, and a senior official said the resulting government shutdown could continue into January.
“Many of the financial and economic indicators that turn first around business cycle peaks are now flashing red in advanced economies,” said Simon MacAdam, global economist at Capital Economics.
“This is consistent with our view that the recent loss of momentum in the world economy will develop into a more severe slowdown in 2019.”
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