What In The World Is Going On With The Stock Market?

Why are stocks falling like this? That's the question I've been hearing from a number of investors and traders. In this previous post, I posed the question of whether we might crash.That post has received almost three times as many hits as my average post--and that is just in two days. That tells me uncertainty is high. The sentiment, as I noted in that post, is bearish.

But the question posed with anguish is why this is happening.

The U.S. economy is not in such bad shape despite political turmoil in the U.S. and concerns about tariffs and trade wars. Nor do we have a Federal Reserve that is aggressively tightening monetary conditions. Inflation overall is tame and there are few signs of overheating in the economy. Indeed, with solid employment numbers, we were not so long ago hearing about being in a sweet spot of economic growth.

Alas, U.S. investors and traders can be horribly U.S.-centric. One thing I love about working out of London is that the perspectives tend to be more global. That is important when markets--and those managing capital--are so intertwined. Perhaps what is going on in the U.S. stock market is not about the U.S. Perhaps it is not about President Trump; not about the daily dose of polarized, politicized commentaries from MSNBC, FOX, CNN; and not about chart patterns and wave counts of American markets.

Consider an excellent article in the Washington Post reflecting upon the difficulties of Britain, given the problems associated with Brexit and the problems associated with remaining in the E.U. The author poses the scenario:Suppose Italy defaults on its debt and Britain is asked to bear some of the load. Will its citizens really want to take on more debt? Will the Yellow Vests of France want to step up to the plate and shoulder that debt? What happens in the event of sovereign debt default? Could Italy be the epicenter of a crisis that the ECB would have trouble responding to, given already low rates? As Robert Samuelson notes, the ingredients of a crisis are present.

So now let's look at some charts of banks.Here is Deutsche Bank:
 

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