Watch the banks.
For once, aggrieved investors can’t blame China. Markets in China are closed for the New Year’s holidays.
After a very ugly week, we expected stock markets to rise this week on the simple principle that nothing goes to heck in a straight line. But we’ve been wrong on this before, and that line could be straighter than we’d expect. So, the US and Europe are starting out the week with a rout.
Last week in the US was particularly ugly for momentum stocks, and for companies that had announced lousy earnings or given squishy forecasts, and even for startups with recent IPOs that were once highfliers and have now crashed. Not even the promise of share buybacks works anymore. Financial engineering has lost its effectiveness. Central-Bank imposed negative interest rates aren’t propping up stocks anymore. None of these tricks works anymore. That’s what markets are learning.
