With the S&P 500 down by 9% on the year by February 10th, we're off to the worst start since the recessionary year of 2008 (at least on the Gregorian calendar); it's too early to tell for the Lunar New Year. If there was any hint of over-optimism on the part of investors heading into the New Year, that by now is gone.
We live in a time growing with extremes wherever you may find them – market moves, the weather, politics. I'm sure the leading Presidential candidates are adding to investors' anxiety and definitely a play on extremes, even within each parties' establishment.
If the market climbs a wall of worry, then there are bloodied fingernails from trying to hang on, and unfortunately, February, hasn't offered any firm holds for investors.
Much like last year, the culprits to this year's market correction aren't much of a surprise – plunging oil prices, concern that China's slowing growth will create contagion, and rising stress in credit/debt markets. Typically, when we have seen oil and stocks so synchronized in extreme price moves it portends an end to the bull market run or an impending recession.
By far the biggest story this year is oil, especially the interesting and inextricable link to all things financial (be it stocks, the U.S. dollar, other commodities or credit markets). Given the swift drop in oil prices, it's creating a negative feedback loop. On any given day, if the price of oil is down you can then assume stock indices must be down as well.
Much like last year (particularly in the second half), the culprits weren't a surprise – plunging oil prices, concern that China's slowing growth will create contagion, and rising stress in credit/debt markets. Collectively, these concerns could be signaling an end to the bull market run or an impending recession.
The biggest story this year is oil, especially the interesting and inextricable link to all things financial (be it stocks, the U.S. dollar, other commodities or credit markets). Given the swift drop in oil prices, it's creating a negative feedback loop.
Oil Vey!
Oil prices have plunged nearly 70% from their mid-2014 high, testing 12-year lows around $25 a barrel. For now, prices are low given a global supply glut exacerbated by OPEC's effort to flood the world with oil in an effort to drive domestic shale producers out of business (which is taking a lot longer than anticipated); the return of Iranian oil; increased Iraqi volumes; Saudi Arabia boosting production to hold on to market share; and a few non-OPEC oil producers (like Russia) that refuse to cut production. Add into the mix slumping global oil demand exasperated by China's slowing economy and it makes for one heck of an unbalanced situation.
