ASX 200 dives 2%, wiping out last of 2023 gains

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.

The S&P/ASX 200 Index (ASX: XJO) has had a sobering week thus far, to say the least. And it’s only Tuesday. At the time of writing, the ASX 200 has shed a nasty 2% so far today. Together with yesterday’s loss of 0.5% and Friday’s loss of 2.3%, the ASX 200 has now lost around 5.6% of its value over the past week or so.

I guess we knew it couldn’t last. The ASX 200 had an absolutely cracking start to 2023 over January and the first part of February. The ASX’s flagship index closed out 2022 at 7,038.7 points.

But by early February, the ASX 200 had climbed as high as 7,558 points. That represented a 2023 gain of 7.8%. That’s an extraordinary run, considering that is rather close to the average gain ASX 200 shares make in a year, not a month.

Most investors would have been shocked if the Index had continued on that trajectory for the rest of 2023.

Alas, this run seems to have come to a screeching halt over the past few trading days. This dramatic loss of value that we’ve seen over the past week pulls the ASX 200 back below where it started in 2023.

So all of those healthy gains that we saw over the first month or so of the calendar year have now been wiped out, and then some:

Consider the stubborn nature of the inflation that most economies, including Australia, have been enduring over the past year or so. And consider those rapid-fire interest rate rises we’ve all witnessed the Reserve Bank of Australia execute every single month for 10 months as well.

Putting these two factors together, it’s arguable that investors were due a reality check.

But it has come swiftly and brutally.

Why are ASX 200 shares back to the start of 2023?

The losses investors have seen over the past week or so have clearly been sparked by one event though. That would be the collapse of the US tech-focused bank SVB Financial Group (Silicon Valley Bank). As we’ve covered extensively here at the Fool, the woes of SVB have set off fears of financial contagion.

These have rattled the markets severely, with most of the ASX 200’s losses coming after SVB’s woes were made public. ASX banks and tech stocks have been hit hard. As have many others. In fact, the only shares that seem to be benefitting from the current environment are ASX 200 gold stocks.

So until this ruckus with SVB dies down, we can probably expect the extreme volatility we are currently witnessing in the share market to continue. It might be time to put on the proverbial seatbelt.

The post ASX 200 dives 2%, wiping out last of 2023 gains appeared first on The Motley Fool Australia.

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SVB Financial provides credit and banking services to The Motley Fool. Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended SVB Financial. The Motley Fool Australia has recommended SVB Financial. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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