Things are not good in the markets recently. For the past few weeks, bad news keeps popping up, especially for the US and China markets.
This post serves as a summary of the bad news, and also provides some insights on where things will be going from this point.
China: Tech, eduction, and Evergrande
The recent news about China’s markets have been mostly pretty terrible:
- Tech crackdown
- For profit education crackdown
- Crypto crackdown
- Rising energy prices due to energy shortages
- Manufacturing slowdown
- Property markets rapidly cooling after Evergrande debacle
One side note here is that China will have a CCP chairman election soon. And the recent volatility is said to be caused by political fights. Please take this rumor with a grain of salt.
United States: Potential financial Armageddon
US also has a negative presence in financial news for the past few weeks:
- Debt ceiling shenanigans
- Rising unemployment
- Spending bill stalemate… between Democrats
- Worst S&P 500 performance since March 2020… Yes, THAT March 2020.
What a mess…
Global: Supply chain
The global supply chain has been under pressure since 2020, and the situation is worsening.
What happens from now on?
Simply put, uncertainty.
Normally, the days just before the end of a quarter will see some rather dramatic fireworks in the stock markets because large funds sometimes need to rebalance their portfolios, and/or window dress their holdings for the quarterly reports. At the same time, certain systemic strategies need to buy (or sell) in large quantities based on how different assets have performed over the quarter.
All these are compounded by the expiry of the quarterly options on September 30th, as well as the quad expiry (index futures, index options, single name options and single name futures) on September 17th, which too tend to drive volatility up.
But I’m not so sure this time. October, historically speaking, is a good month to invest in the stock market. But rumor has it that a major correction is on the way, I’m not so sure that putting your hard earned money in the market now would be a good idea. Let’s see.