Stocks plunge, some analysts remain optimistic on US market

Stocks fell sharply on Thursday.

The S&P 500 tumbled 2.1 percent to its lowest level since February, breaching its 200-day moving average and erasing its gain for the year in the process. Earlier on Thursday, the Shanghai Composite Index plunged 3.4 percent while the STOXX Europe 600 fell 2.1 percent.

In emerging markets, the MSCI’s Emerging Markets Index fell 1.2 percent to the lowest level since 2009 and Kazakhstan abandoned its currency peg a day after it let the tenge fall 4.5 percent against the US dollar.

Despite the selloff on Thursday, some analysts remain sanguine on US stocks.

Bloomberg reports that, while unlike in recent times, the S&P 500 failed to immediately recover after falling below its 200-day moving average, “money managers like Tom Mangan ... say it will”.

Also, the volatility index has moved too fast. The VIX closed at 19.14 on Thursday, higher than every contract predicting its future path through April of next year. This, according to Scott Maidel at Russell Investments, shows that speculators think the volatility gauge has risen too far, too quickly. An expected reversion of the VIX typically means that equities will rise.

Finally, the US stocks selloff will “be relatively short-lived in the U.S. because the domestic fundamentals are simply better,” according to Jim Russell, a portfolio manager at Bahl & Gaynor Inc. “It should be confined to a few percentage points.”