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6 Reasons Why Stocks Crashed Today
SPACs, crypto and Chinese related stocks have been crashing today. No specific catalysts caused this sell off, just an accumulation of things such as the China Real Estate default Evergrande situation, the rona, the fear of lower growth & high valuations, the FED tapering and the budget.
🚀 Join the VIP Membership Group (Discord) today! ► https://fiveorlessfinance.com/
1. It seems like the largest Chinese real estate company, Evergrande, is defaulting on $300 billion of debt today. This has potential ripple effects throughout China and the global economy. Then again, this is short term news in nature which has no long-term impact on any of the businesses I own. The vision remains.
2. Rona. Still has a 7 day average of 150k cases per day in the US, but is much better contained.
3. The fear of lower growth as mentioned in the previous post. This comes with the fear that valuations are getting too high. I would agree speaking of big tech. But I would strongly disagree speaking about small caps, which are already, for the most part, down 50-70% from ATH. In plain English, the market is shifting their fear from inflation, to the fear of lower growth, hence the linear correlation. The market was pricing in a perfect scenario for growth. Reality is now sinking in that growth/consumption might not be as rosy as in early 2021. The economy is actually slowing down, not just due to delta, just like what Powell predicted. It's becoming apparent that the economy is shakier than previously thought, and that monetary policy is not here to save our butts anymore. All of this is normal in my opinion. The economy is mean reverting. In other words, it's like a yoyo. Saving was at its highest and consumption was at an all time low during the lockdowns in 2020. Then, with savings so high & stimulus checks, spending took a massive boost when the economy re-opened, as expected. Now, the economy is cooling off, which makes sense in my opinion. This means that inflation is transitory.
4. The FED is having a QE taper meeting this week, which is expected to be delayed to November.
5. The infrastructure package might potentially suppress growth / or not pass. It's looking like Pelosi won't get support in the House. On the flip side, there are things within the infrastructure bill like capital gains taxes. Then, the Bipartisan Infrastructure Package is being voted next Monday. If that gets delayed, the other infra packages are likely to get delayed.
6. If Congress doesn't approve a budget by the end of the month, the government will potentially shut down. This type of issue happens almost yearly and is more of a political fugazzi than anything else.
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By ElBlancoSPACs, crypto and Chinese related stocks have been crashing today. No specific catalysts caused this sell off, just an accumulation of things such as the China Real Estate default Evergrande situation, the rona, the fear of lower growth & high valuations, the FED tapering and the budget.
🚀 Join the VIP Membership Group (Discord) today! ► https://fiveorlessfinance.com/
1. It seems like the largest Chinese real estate company, Evergrande, is defaulting on $300 billion of debt today. This has potential ripple effects throughout China and the global economy. Then again, this is short term news in nature which has no long-term impact on any of the businesses I own. The vision remains.
2. Rona. Still has a 7 day average of 150k cases per day in the US, but is much better contained.
3. The fear of lower growth as mentioned in the previous post. This comes with the fear that valuations are getting too high. I would agree speaking of big tech. But I would strongly disagree speaking about small caps, which are already, for the most part, down 50-70% from ATH. In plain English, the market is shifting their fear from inflation, to the fear of lower growth, hence the linear correlation. The market was pricing in a perfect scenario for growth. Reality is now sinking in that growth/consumption might not be as rosy as in early 2021. The economy is actually slowing down, not just due to delta, just like what Powell predicted. It's becoming apparent that the economy is shakier than previously thought, and that monetary policy is not here to save our butts anymore. All of this is normal in my opinion. The economy is mean reverting. In other words, it's like a yoyo. Saving was at its highest and consumption was at an all time low during the lockdowns in 2020. Then, with savings so high & stimulus checks, spending took a massive boost when the economy re-opened, as expected. Now, the economy is cooling off, which makes sense in my opinion. This means that inflation is transitory.
4. The FED is having a QE taper meeting this week, which is expected to be delayed to November.
5. The infrastructure package might potentially suppress growth / or not pass. It's looking like Pelosi won't get support in the House. On the flip side, there are things within the infrastructure bill like capital gains taxes. Then, the Bipartisan Infrastructure Package is being voted next Monday. If that gets delayed, the other infra packages are likely to get delayed.
6. If Congress doesn't approve a budget by the end of the month, the government will potentially shut down. This type of issue happens almost yearly and is more of a political fugazzi than anything else.