IN THIS ISSUE:

1. OK, Stocks Have Plunged, Let’s Look at the Reasons Why
2. Increasing Worries About a Serious Global Trade War
3. IMF Unexpectedly Scales Back Estimate of Global Growth
4. Last But Certainly Not Least – 10-Year Yield Spikes to 3.25%
5. Morgan Stanley: 3% on the 10-Year Note is “Tipping Point”

Overview

I had a completely different topic in mind for today than what follows. In light of what has happened in the stock markets over the last two weeks, I feel the need to address that issue today. While this down move has so far been only a 7% stock market correction, I sense a lot of anxiety on the part of investors.

I’ll discuss the main issues the financial media is focused on as the cause of the latest selloff, and add my thoughts on whether those issues make sense or not. And I’ll share what I feel is the main reason for the latest market correction. Let’s get to it.

OK, Stocks Have Plunged, Let’s Look at the Reasons Why

On Wednesday, October 3, the Dow Jones Industrial Average soared to yet another new all-time record high just above 26,950 but then retreated to close well below the record high that day. The Dow then traded sharply lower on the following Thursday and Friday, dragging equity markets around the world lower with it.

The sharp decline continued last week with the Dow plunging to a low just below 25,000 on Thursday, a loss of about 7% from the high before rebounding modestly on Friday. So far this week, the market continued lower on Monday but is up several hundred points in the Dow so far today.

DJIA

As always, market analysts tried their best to explain what was a most unexpected downdraft in the market. Here’s a summary of the major factors that led to the stock market plunge over the last two weeks.