While I think this correction may well have a ways to go, I think you are being way, way too pessimistic re: U.S. markets.
The one thing that could really cause a worldwide deep panic selling is a wholesale collapse of the Japanese banking system.
Ironically, the very factors that have kept Japan from moving past its bad loan problems in its banking system are very, very likely to prevent any sudden, wholesale and contagious collapse. The system is too government controlled and propped up for that to happen.
But the Japanese recession could of course worsen for a time, and several of their large banks can, and probably will, be allowed to fail in the immediate future. It just won't spread like wildfire. Although it will no doubt shock the markets for a bit.
A slowdown in profits in the absence of a U.S. credit collapse recession/depression (the 30s, the 1890s, the 1905 period) and while interest rates are low and not sharply rising, is very unlikely to lead to a severe market collapse.
The severe, but very short 1987 collapse was trigger by SHARPLY rising interest rates. Which occurred in a very high deficit, sharply rising corp. debt environment which triggered creditable fears of both sharply rising inflation and a credit collapse.
We are in a vastly healthier environment today.
Which is reflected in sky high large cap index stock prices, of course.
I think more than another 10% in the S&P and Dow is very unlikely. And it is also entirely possible that it doesn't go too much lower from here, in my view.
But certainly today was not a correction climax.
Doug |
