An analyst reminded investors on Friday to exercise caution during the current global stock market sell-off because there is a risk of further declines in stock prices. It may not be a good time to bottom-fish yet.

The series of US economic and financial report data released this week worsened the profitability prospects of US stocks. On the one hand, the US labor market is continuing to cool down. ADP new job additions, also known as the "small non-farm", exceeded expectations and fell sharply on Wednesday. The wage growth rate fell to its lowest level in three years. On Thursday, first-time claims for unemployment benefits in the US for the week of July 27 rebounded to a one-year high, and on Friday, US July non-farm payroll added only 0.114 million people, significantly below expectations, and the unemployment rate hit a new three-year high, triggering the Sam rule, an accurate recession indicator with a 100% accuracy rate. On the other hand, US data added more signs of economic slowdown, with the US July ISM manufacturing PMI shrinking by the largest amount in eight months, exacerbating market concerns about a US economic recession. In addition, the high "AI bubble" has long made investors lose patience with AI ROI, and the market's scrutiny of tech behemoths' financial reports has become more stringent. Risk aversion has escalated, dealing a heavy blow to US stocks and causing AI stocks, chip stocks, and tech stocks to plummet, resulting in a black August for the US stock market. Investors are beginning to worry that the Federal Reserve may be falling behind in its actions to cut interest rates in order to avoid a recession.

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If the US labor market cools down, it may cause a global economic slowdown. Investors' pessimistic expectations have also spurred bets on interest rate cuts in the UK and Europe, directly leading to the decline of European stocks on Thursday and Friday. On Friday, the STOXX 600 Index fell by 2.73%, and the European technology sector fell by more than 6%, with stock indices in Germany, France, Italy, the Netherlands, and Spain all declining.

Asian markets were also not spared. On Friday, the Nikkei 225 index fell sharply by 5.8%, and the TOPIX index fell by 6.1%, the largest decline since 2016. The Taiwan Weighted Stock Price Index fell by 4.4%, and the South Korean Seoul Composite Index fell by 3.7%.

How is Wall Street viewing whether it is too early to buy in now?

Shane Oliver, Head of Investment Strategy and Chief Economist at AMP Investment Management, said in a research report released on Friday:

"The market seems to be entering a period of adjustment."

"Thanks to news of positive inflation, increased expectations of future interest rate cuts, and an optimistic view of the benefits of information technology and AI-related income, stock prices soared in July."

"Although AMP believes that if an economic recession can be avoided, the low interest rate environment over the next six to twelve months is likely to boost stock prices, global stock markets look likely to decline further, indicating that now may not be the best time to bottom-fish."

Cedric Chehab, Global Country Risk Director at BMI Research, said in an interview with the media on Friday:

"The current market sentiment deterioration is caused by a combination of factors, and the market adjustment is absolutely normal. The sell-off started about a week and a half ago, but intensified this week, triggered by multiple factors."

He continued:

"First of all, the hawkish stance of the Bank of Japan has led to the collapse of short-term arbitrage trades. At the same time, unfavorable manufacturing data published by the United States and some employment-related indicators have also caused panic in the market."

"Then overnight, we saw large fluctuations in the profits of some large companies. These factors combined to further drive down the stock market, which was already highly valued."

"Some investors seem to have overlooked a key factor, that stock markets usually experience seasonal volatility increases from July to October."

"Therefore, given the historical response patterns of stock markets to calendar effects, the current sell-off phenomenon is not surprising, especially after such a large increase in the US and global stock markets."

"Such an adjustment is completely normal when the market is overheated, especially when the market momentum is excessive."

When asked if investors should panic in the face of this sell-off, Chehab responded:

"No, I don't think it's necessary. From a technical analysis perspective, the market still has solid support on moving averages and key technical levels."