September 21, 2021
Good morning,
When the market is in free-fall as it was yesterday morning, the decline is quickly extrapolated in investors’ minds and the fear factor leads to – this is something worse than a correction. A global pandemic, a Lehman moment, a bubble bursting – the initial moments of the last three shocking bear markets 2020, 2007, 2000. Fear of a Lehman moment was palpable yesterday. As Ray Dalio said this morning, a $300B bankruptcy in a country’s own currency will not be a problem. It is not, will not be, structurally damaging. Evergrande is not a Lehman moment. I think the market accepts Ray’s perspective this morning.
As relentless selling continued yesterday into the late hours of the trading session, it was interesting that once the down-5%-threshold was broken (down 5% from the S&P 500 all time high that is), it was a flash-point of sorts. The buyers came in and reversed the market so quickly that down-5% lasted a matter of minutes, not hours or days as would be historically common.
So we have our 5% correction of sorts – and it is somewhat comforting that market action is correction-like thus far and not something worse. Is it up, up and away now? It could be, this bull market owns all the speed and magnitude records for climbing, but historically speaking it may be a few days of back and fill and most likely testing some lower levels made yesterday. See you tomorrow.
Be well,
Mike