KW: The thing is that so many commentaries have been warning of this for so long but warning of much much more. Drops of 30% 50% even 70% I have read for a long time now from pretty well respected sources so this may be the forerunner or just a blip on the screen and tomorrow all the indexes come screaming back up with ‘didn’t we tell you the market is heading higher for a long time’ and ‘no need to worry about your investments’. Dent Research and Harry Dent for example is predicting ‘the greatest depression we’ve ever seen’. Scary thought, but this is the effect of rising interest rates as the FED tries to normalise conditions in preparation of the big sell off yet to come
Dear Reader,
Horror returned to Wall Street today…
The Dow Jones plunged 832 harrowing points — its worst day since Feb. 8. The S&P gushed 96 blood-soaked points itself. More than half the stocks in the index were in correction territory today.
The broad index is also sunk in a five-day losing streak — its longest since 2016. But tech stocks were the scenes of greatest bloodshed today. Amazon — down nearly 4%. Netflix — down over 6.3%. Facebook and Apple — down over 2% each. In all, the Nasdaq plummeted 316 points by the closing bell.
Meantime, our old friend VIX, Wall Street’s “fear gauge,” jumped above 22 today — its highest reading since March. MarketWatch is on hand with today’s summary:
U.S. stocks slumped Wednesday, with major indexes breaching key support levels and extending their downward spiral, as rising bond yields continued to weigh on market sentiment.
Ah yes, the stock market’s latest bugbear, the Treasury yield, was at its tricks again today. The 10-year Treasury yield was up to 3.225%… squarely in what Deutsche Bank’s Aleksandar Kocic calls the “danger zone” (3.20%-3.70%).
As explained in Friday’s reckoning, it is not so much the rise in yields… as the speed of it all: Rapidly rising yields over a short time frame [could lead to] a simultaneous sell-off in stocks and bonds.
Jeremy Klein, chief market strategist at FBN Securities, further explained today: Portfolio managers tend to move to the sidelines in a skittish tape out of fear of suffering from a quick and sharp pullback.
More to come tomorrow.
But here at The Daily Reckoning, we rise above the heat of the day… and take the long, cool view of things…
We suspect the latest rough house will ultimately extend the life of this this aging bull.
How so?
That is because we have taken aboard Sir John Templeton’s famous maxim:
“Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.”