The S&P 500, which tracks the 500 largest publicly traded companies in the United States, fell 2.6 percent on Friday, but remains at historically high levels. The Nasdaq Composite Index, which includes the dominant American tech companies, fell even more, dropping 4.2 percent.
Analysts, such as Robert Bergqvist, attribute the declines to strong US jobs figures, which increase the likelihood that the US Federal Reserve will raise interest rates this year, making it more expensive for companies to borrow and more attractive for investors to buy bonds.
The yield on US ten-year government bonds rose sharply on Friday. The jobs figures confirm that the US labor market is showing impressive resilience to everything that happens in the world and in US economic policy. This has direct consequences for what will happen to the US policy rate going forward, Bergqvist said.
“The decline was expected”
He recalls that the US stock market has been on a roll in recent months, fueled by expectations that AI will revolutionize society. Before Friday's decline, the S&P 500 had been rising for several weeks in a row.
The stock market correction we experienced on Friday was expected, logical and reasonable. From time to time, and it is part of the natural dynamics of the stock market, we end up in tunnel vision and herd behavior. That is precisely when the risks increase that we lose our footing and get carried away. Therefore, I think that such corrections should be seen as a natural feature.
“Higher in a year”
Bergqvist thinks it is difficult to predict the near future, apart from the fact that European stock markets will likely follow suit and fall at the open on Monday.
If you ask me where the stock market will be in a year, I would say higher, but if you ask me where the stock market will be on Monday, that's when I start to hesitate because I have no idea. You can look at how the US stock market closed and discuss what will happen in the near future, but then there are so many other things. I think the underlying forces in terms of growth and new technologies still look good, Bergqvist said.
