“RISK HAPPENS FAST” ...as our old friend, Doug Kass, likes to tell us, for all ten of the markets comprising our International Index have fallen since Friday, with 5 of the 10 having fallen by more than 2% and with one… the market in Brazil… having fallen by nearly 4%.
Trend lines that had been sloping upward in instance after instance and which had held for months have been broken through to the downside, proving themselves to be readily vulnerable. “Reversals,” one after another, have evolved, and not merely daily reversals, but in many instances weekly and now even monthly reversals to the downside have either already evolved or are on the verge of doing so.
Risk does indeed happen fast, with the blame today going to be cast upon the Federal Reserve Bank for the thought that it may actually vote to tighten monetary policy at its meeting next week. We have never been of the mindset that the Fed was prepared to tighten policy and to raise the o/n Fed Funds rate next week, but many were and more had become so following Mr. Rosengren’s comments on Friday that he was beginning to err toward tighter policies… this from one of the more “dovish” of the voting, regional Federal Reserve Presidents. That was all that was needed to change the market’s collective psychology at a moment’s notice, and although we are quite certain that the global market’s bearish rush shall quell any further consideration on the part of various FOMC voting participants about tighter policies, it shall not likely make any difference; the die’s been cast and risk has indeed happened fast.