Wow. You’re probably counting pennies after today’s massive and nearly 2.5% sell off. So what’s going on? Why is the market selling off? What gives?
Stock Market Today: Get Out Now Or Get Killed
- Emerging Markets – Policy tightening in emerging markets is prompting a global sell off. Turkey, South Africa, and India all raised rates last week. Brazil and Indonesia already raised rates, and other countries like Chile, Peru, and Hungary want to loosen policy but won’t.
- US Fed Reserve Tapering – The US is pulling back on its asset purchases which has boosted markets since 2009. Despite the tapering, interest rates have been dropping because of global growth concerns. This is how we know the sell off and not just a technical sell off — because large investors are moving back into safe assets like US Treasuries.
- Weak Economic Indicators / Earnings – US manufacturing came in much lower than expected. Growth in China’s manufacturing sector is slowing. Earnings are modest.
- The Market Is Massively Overvalued – According to the Shiller PE ratio, the stock market is nearly 50% overvalued when taking into account corporate earnings and current stock prices.
The chart below will probably make you sad, and somewhat afraid, and possibly depressed. Hold on and buckle up, it’s going to be a volatile year.