The S&P/ASX 200 Index (ASX: XJO) is having another not-so-nice day on the markets today. At the time of writing, the index is down another 2.48% at the time of writing to 5,858.8 points. That's the lowest level the ASX 200 has been at since mid-June. Since last Thursday, the ASX 200 has now lost around 4.5% of its value, which means we're not quite in official correction territory just yet. That requires a fall of 10% or more from the most recent high.
But is that the way we are headed after today's market moves? After all, this doesn't seem to be shaping out to be a 'one-off' hit, seeing as the ASX 200 has been down-trending since last week. Or could we even be heading for another 2020 market crash (which is defined by a 20% fall or more)?
US tech wiped out
Well, first thing's first. The ASX 200 is probably only falling because of what's happened in the US markets over the past week. The S&P 500 and the Nasdaq 100 have both been hit very hard. The Nasdaq's blowoff has been especially spectacular. Since last Thursday (US time), the NASDAQ 100 is officially in correction territory, down 10.85%. That's a sharp correction for just a week's worth of trading.
The trigger? Massive sell-offs in US tech shares. The poster child for Nasdaq exuberance – Elon Musk's electric car and battery manufacturer Tesla Inc. (NASDAQ: TSLA) – is down more than 34% over the past week. This move is apparently solely a response to the company not making the cut for the S&P 500 Index this quarter. Not a reason to devalue an entire company by a third under normal circumstances. But hey, this is apparently the world we're living in now.
Other tech shares haven't been spared either though. Apple Inc. (NASDAQ: AAPL) is down 15% over the past week, as is Amazon.com, Inc (NASDAQ: AMZN) with a 9.74% drop. Even lockdown wunderkind Zoom Video Communications Inc (NASDAQ: ZM) is down more than 20%.
So what's going on? And how does this affect the ASX?
ASX 200 correction or crash?
Unfortunately, the ASX 200 is inextricably linked to the US markets, and, as the old saying goes, if the US coughs, the rest of the world catches a cold. Big falls in US markets tend to prompt ASX investors to take profits and pull of out 'risk-on' positions. What we've seen on the ASX 200 over the past week is 'froth being blown off the top of the market' in my view. Whilst this is not good news for investors today, I think that it's a temporary setback for ASX shares.
Unless the US markets start tanking in a more dramatic fashion, or some other structural market issue emerges, I don't think investors have too much to be worried about today. Markets do these kinds of things all the time, it's a healthy pullback after things got a bit too carried away in my view. As long as you're still happy with the holdings in your portfolio, I wouldn't lose too much sleep just yet.
