Stocks Begin the Year with a Big Correction

The stock selloff that began this past Monday has now morphed as of yesterday’s market close into statistically the worst four day start of the year in stock market history.

The main impetus behind the selloff is a carryover from last August and September – that is the concern about the strength of the Chinese economy. Stocks are selling off around the world because of the major volatility in China’s stock market. Fears linger of a bigger than expected slowdown in China’s economy this year. Other recent geopolitical events that have occurred this week have added to the market’s anxiety; i.e. concerns of the tensions between Iran and Saudi Arabia and the testing of a possible hydrogen bomb by North Korea. Only about 7% of our economic activity is directly linked to the Chinese economy.

Overall the global environment continues to be slightly bearish. The Chinese economy is clearly slowing, the U.S. economy is flat and our stock market valuations continue to be on the high side. These factors alone suggest that market volatility and economic uncertainty will remain present throughout 2016. Our short-term outlook remains defensive and cautious, but not pessimistic.

This entry was posted in Current Events.