AUGUST does seem to specialise in episodes of market turmoil, whether one looks back to 2007 (when the subprime crisis really started to bite) or 2011 when the eurozone debt crisis seemed to spread to Spain and Italy. The fact that so many traders and investors are on holiday must make a difference. Liquidity is low; juniors are in charge of investment funds and may be unwilling to act as buyers when prices fall.
On return from his holiday, your blogger sees a number of implications of the market move. The fundamental rationale was that markets seemed to catch up with a theme made repeatedly in previous posts; that the slowdown in world trade growth (particularly Asian exports) and falling commodity prices indicated there was a problem with growth in emerging markets, particularly China.
But many investors will have been struck by the sheer ferocity of this week's moves, which saw the Dow Jones Industrial Average open more than 1,000 points lower on Monday and blue chips like GE and Pepsi fall more than 20% at this stage. Some were reminded of the flash crash of 2010, when markets...Continue reading
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