Bloodbath Continues After Hours

With the ugliest day on Wall Street in a long time, the “bounce-back” may elude us tomorrow as the Dow is down another 1,000 points after hours. 

What’s going on? 

Well if you have been reading this newsletter then you would have already been informed of the macro themes that continue to present compelling and material downside risks to this market. The interesting thing about today’s selloff, and the continuation in the after-market, is that there was no significant single news event, no change in rates, no spike in oil, no new tariff news. 

It seems to simply be an unexpected pocket of air that hit the markets without any warning. The reassurances from the White House about the “strength of the economy” will prove meaningless to investors who have their own cash on the line. What equity investors finally picked up on was that the economic readings suggesting strong growth are driven by the low rate environment. And since rates have been spiking up quickly, the stock market as a forward indicator is incorporating its expectations for the future impact of these rate hikes. 

The market is not liking what it’s seeing! 

Nedbank's strategists Neels Heyneke and Mehul Daya explain why "we are approaching historical thresholds", where Fed tightening traditionally becomes the "straw that breaks the camel's back" for the equity markets and why "this time should be no different." 

According to Dennis Gartman, “the U.S. economy has close to a 100% change of entering a recession.” Gartman noted that the catalyst will almost certainly be the Fed.

As of now, he seems to be right. 

Dan Shainberg

#DanShainberg

#RecessionResister
@DanShainberg