Wheels Come Off as European Banks, British Pound, Bond Yields Crash Mike Larson | Monday, June 27, 2016 at 4:30 pm
Friday and this morning, the wheels came off our stock market. The Dow Jones Industrial Average plunged 871 points in just two trading days, while the S&P 500 sank to a three-and-a-half-month low. The Nasdaq Composite tumbled more than 113 points after losing 202 points at the end of last week.
But even that doesn’t speak to the carnage in select sectors and assets.
> European banks were an epic disaster, with U.S.-traded ADRs like Deutsche Bank (DB), HSBC Holdings (HSBC), UBS Group (UBS), Barclays PLC (BCS), and Royal Bank of Scotland (RBS) crashing anywhere from 4.2% to 20.9% today alone. Martin Weiss discussed many of the fundamental problems facing these stocks earlier, and the Brexit-induced selling is only making things worse …
> The British pound tumbled another four-and-a-half cents against the U.S. dollar, bringing its two-day losses to a whopping 14%. That’s virtually unheard of for developed-world currencies, and it leaves the pound at its lowest level in 31 years …
> Bond yields continued to plummet as well, with the yield on the 30-year Treasury falling to as low as 2.28% and with the yield on the 10-year dropping to 1.46%. That puts U.S. government bond yields within a whisker of their all-time lows.
What’s behind this financial bloodbath? The Brexit vote is the immediate trigger, obviously. Wall Street went into Thursday’s close ecstatic about the “Remain” vote they were confident was coming … only to get completely blindsided when “Leave” won. So investors were caught massively offsides, and have been scrambling ever sense to sell and/or hedge in order to get in better position.
Markets are in turmoil since last week’s Brexit vote.
It’s much more than that, though. European politicians and global central bankers are running around trying to figure out what to do, holding panicked meetings, teleconferences, and conversations on both sides of the Atlantic and Pacific.
But as I asked the other day, what more can they really do? They’ve already slashed interest rates more than 650 times. They’ve already bought more assets than ever before, artificially inflating virtually every market on the planet in the process. And they’ve already pledged to do “whatever it takes” more times than I can count.
But none of their medicine actually worked for the real economy — and in fact, it’s now actually hurting more than helping. That’s forcing more investors to finally accept what I have told you for many, many months: Central bankers have lost control of the markets!
“If you don’t take steps to protect yourself, you’re doing your portfolio a grave disservice.”
I don’t know exactly where this selloff will take us. With us getting more and more oversold in the short term, we may also see a bounce at any time. But that’s near-term stuff. The most important thing I can tell you about the long-term outlook is the same thing I have shouted from the rooftops again and again since last summer:
The credit cycle has turned …
The “Unseen Hand” has gone from help to hindrance for stocks …
And if you don’t take steps to protect yourself (and for that matter, profit), you’re doing your portfolio a grave disservice.
Just one example: I recommended subscribers in my All Weather Trader to peel off one position into this morning’s panic selling. I estimate they pocketed a profit of a whopping 412% as a result – in just two weeks!
Not every trade works out so well, of course, and losses can and do happen with any aggressive trading service..
Now, it’s your turn to sound off. Do you think this selloff is almost over, or is there more pain to come? What are you buying or selling given the increasing volatility? How do you think central banks and politicians will respond, and will it have any noticeable impact? Please weigh in below when you get a chance.
Poster Comment:
Several links in text at source.
