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Unwelcome Déjà Vu in U.S. Markets

Another week of losses
U.S. stocks were mixed Friday, but movement was mostly marginal. Still, major indexes ended the week in the red. Asia-Pacific markets traded mixed Monday as well. Japan’s Nikkei 225 added 0.75%, but Hong Kong’s Hang Seng Index dropped 1.38%. Beleaguered Chinese real estate company Country Garden will be removed from Hong Kong’s index on Sept. 4 and replaced by Sinopharm.

China’s rate cut and intervention
China’s central bank lowered its one-year loan prime rate by 10 basis points from 3.55% to 3.45%. That’s likely to benefit household and corporate loans, though the rate cut was lower than economists expected — and the country left its 5-year rate unchanged. Separately, in a video conference Friday, Chinese financial regulators called for support in resolving debt risks in local governments.

Global markets sank
Surging global bond yields, a slumping Chinese economy amid a worsening property sector crisis, the possibility of higher interest rates in the U.S. — those factors combined to batter stocks last week, analysts say. It wasn’t just U.S. markets that fell — Hong Kong’s Hang Seng Index closed in bear market territory Friday.

Blasting off bitcoin holdings
Bitcoin dropped to $26,053 as of publication time. Compared with its price a week earlier, that’s a dramatic fall of around 11%, its worst since November. The sell-off appears to be prompted by a report that Elon Musk’s SpaceX had sold its bitcoin holdings in 2021. Despite the plunge, bitcoin is still up about 57% this year.

[PRO] ‘Three’ things to look out for
The week ahead will “revolve around three things,” said Infrastructure Capital Management CEO Jay Hatfield. “Nvidia’s earnings, Nvidia’s earnings and, to a lesser degree, Jackson Hole.” CNBC Pro’s Sarah Min lays out what analysts expect from the chipmaker’s highly anticipated report, and how Federal Reserve Chair Jerome Powell’s speech could move markets.

The S&P 500 started its precipitous plunge around mid-August last year, sunk by the deadweight of technology stocks. And here we are a year later, experiencing an unwelcome sense of déjà vu. Technology stocks couldn’t stop tumbling for the week. With its 1.7% loss Friday, Tesla, in particular, marked its sixth straight session of losses — its longest down streak this year. It’s a jarring echo of the electric vehicle company’s horrible December.

Another victim of the week’s sell-off was Cathie Wood’s ARK Innovation ETF. It lost around 4.7% last week for its third consecutive weekly loss. Like Tesla, the tech-heavy fund hasn’t seen such sustained losses since December last year. All that meant major indexes had a bad week. On a weekly basis, the S&P 500 was 2.1% lower and the Nasdaq Composite slipped 2.6%. It was the third consecutive losing week for both indexes, the first since February for S&P and since December for the Nasdaq. The Dow Jones Industrial Average shed 2.2% for its worst week since March.

What does this mean? Are we stuck in a new market paradigm, where volatility rules? Will stocks climb only to plunge sharply in a year? Not quite, if Grantham Mayo Van Otterloo, the investment firm founded by Jeremy Grantham is to be believed. GMO thinks the U.S. stock market will post an average return of 6.5% through 2030 — better than any other major asset class. In other words, stocks will still have a sustained rise in the long run — as they always have, historically speaking. As long as investors don’t flee at the first sign of trouble, there’s still money to be made even amid today’s turbulent times. Investors just have to hang tight and be patient.

Source: CNBC Daily Open