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What’s the Real Meaning of the Stock Market Swoon?

What’s the Real Meaning of the Stock Market Swoon?

Nobody dares discuss it openly for fear of triggering a panic, but there aren’t enough lifeboats for everyone.

There’s no shortage of explanations on the whys and wherefores of the US stock market’s recent swoon / swan-dive / plummet. Here’s a few of the many credible explanations:

— the economy has reached peak earnings so there’s no fundamentals-driven upside left;

— bond yields are now high enough to dampen enthusiasm for inherently risky stocks;

— central banks curtailing / ending their quantitative easing programs have reduced liquidity in the financial system;

— US markets are catching up to the rest of the world’s market slump;

— the US market is overvalued by just about any measure;

— uncertainty about the mid-term election;

— corporations had to limit their stock buy-backs in the pre-earnings season blackout;

smart money has been selling all year, and this finally overwhelmed dumb moneybuying the dips;

— low volatility begets high volatility;

— key technical supports were broken like toothpicks;

— the increasing probability that trade wars will actually start impacting corporate bottom lines;

— market punters peering into the future saw higher rates, and decided to dump stocks now rather than later;

— the market is discounting the coming recession;

— complicated currency / FX reserves dynamics, mostly involving China’s attempts to control its currency while propping up its domestic credit bubble and tightening the screws on capital flows.

Whew. Got all that?

My explanation is much more simple: the status quo is fragile, and everyone’s grip on the crumbling cliff-edge of “prosperity” is precarious–and we all sense it. The security we all took for granted is turning to sand as the system breaks down. Job security–you’re joking, right? Pension security–you take us for chumps? Sure, your bank account is guaranteed by the FDIC, but nobody’s guaranteeing your income, your purchasing power or the security of your grasp on the good life.

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