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8/24/2015

The underlying risk that has existed for a few years in many equity markets is now rearing its ugly head.

The Doc began 2015 with a piece that described many of the global risks that existed in financial and political markets that rendered owning stocks very risky, click here.  What is transpiring now is perhaps a scenario where “the can” may not be able to be kicked much further to promote a correctionless US stock market.  You’ve probably followed the news, which has emphasized trouble in the Chinese economy and equity market as a major driver behind massive stock turbulence.  This is true, but let’s say the Chinese scenario may be the needle that is pricking bubbles around the globe.  Other factors that have taken their toll around the globe is the ramifications of declining oil prices; the near certain fed hike in the pipeline that was perhaps pushed back to neutral again; renewed Greek political problems, to name a few.

Stock markets around the globe looked dismal to end the week last week and the early trade on Sunday evening, NY time, is depicting more of the same.  Here’s a perspective to keep in mind when viewing large price declines in some indexes….compare current levels to where those indexes were just a couple of years ago and ask yourself…1) where were the normal corrections over that time?  2) what caused the dramatic price appreciations in those indexes?  Then you may not be so surprised as to why the dramatic declines.

Volatility jumped late last week and price action will be excessive.  Be careful of attempted quick fixes to turn the markets higher…this will add to the volatility.  This one will most likely take some time to grind through.

 

Stephan Kudyba (MBA, PhD)                      THE MARKET DOCTOR

 

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