Recently, global stock markets were on a roller coaster. Just a couple of weeks ago, US equities enjoyed two-year long nonstop gains. As a result, investments in the stock market hit record values. However, the market sentiment reversed in a flash.
The latest meltdown in Wall Street spooked investors worldwide who rushed to sell off equities. Last week, the US stock indices incurred the steepest weekly losses in more than two years. Gloomy headlines in the mass media worsened the panic. No wonder, heavy selling in Wall Street dealt a blow to global stock markets. On the whole, the crash in the US swept away almost $5 trillion from global stocks. The benchmark stock indices shed 3-7% in a single trading day. Experts say that the situation with ETFs (exchange-traded funds) mainly accounts for a global financial meltdown. Most of them shut down in mid-February. Some of them still exist, but investors are evidently withdrawing money from them. "The market has become a much more dangerous place due to index funds and ETFs," billionaire and legendary investor Carl Icahn said in an interview to CNBC. “It looks like 2008 when market players used to buy mortgage securities and CDS,” he added. Besides, he took notice of another worrisome sign – "The market itself is way over-leveraged." Moreover, he predicted that "one day this thing is just going to implode." He explains that investors are obsessed by the idea of fast profits and are injecting money into index funds without realizing how risky they can be. "Passive investing is the bubble right now, and that's a great danger," the famous investor commented on the latest market crash.
