Global stock markets plummeted Monday as concerns about the widening fallout from the credit crisis fueled fears about a world-wide recession.CNBC.com
US stocks opened sharply lower following selloffs in Europe and Asia. The dollar climbed while oil prices plunged.
A spate of bank rescues in Europe heightened fears about the stability of
global financial institutions.
Financial shares led the slide on Wall Street after markets tumbled in Asia overnight
What's been really fascinating over the last week is that the one good day came on Tuesday. The U.S. market sold off huge in response to the House rejecting the bailout on Monday. Then, on Tuesday, it gained much of it back even though Tuesday it seemed as though the bailout was at its dimmest then. Yet, as the bailout got closer and closer the markets got worse and worse. This morning, the markets have clearly totally rejected the bailout as any real fix.
Essentially, the markets are acting like spoiled seven year olds. They don't know what they want. They didn't like when the bailout was rejected, and now they don't like it now that the bailout has been accepted. The markets don't know what they want. Frankly, what they want is for this massive problem to go away though that isn't happening soon.
We are also seeing a massive so called flight to safety which is a transfer of money from stocks into bonds. Bonds globally have been doing much better in an inverse relationship of stocks. Gold is also up significantly in a similar flight to safety. In other words, everyday stocks do poorly bonds and gold do well. That is a typical occurrence during any significant period of volatility. Furthermore, the Dollar has gotten stronger against just about every other currency. That appears to be happening because the situation at home seems to be handled well compared to what the rest of the world has done. It appears the only thing the bailout has done in the short term is strengthened the Dollar compared to the rest of the currencies.
Anyone who loves financial drama will love the market for the next month. For my money, a volatility play continues to be the best bet. There is still plenty of excitement left. It appears there are the roots of a domino effect of bank closures and bailouts in Europe. Also, third quarter Gross Domestic Product numbers are due out this week. Whatever those are they will move the market in a major way. Look for the indefinite future to be a serious ride in all the markets.
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