Markets are in turmoil.
On Friday the Dow fell more than 500 points at one point as the stock market has entered a correction — defined as a 10% decline from recent highs — to start 2016.
Oil, meanwhile, has collapsed another 5%+ on Friday and is at a 12-year low.
And while investors might be looking at this a number of ways, Rich Barry at the NYSE said in an email on Friday afternoon that in order for the market to stabilise — let alone rally — five things need to happen.
Here’s Barry (emphasis ours):
We all knew that this was coming, we just weren’t sure about WHEN it was coming. Let us not forget, the market has had a 6+ year bull-run that saw the S&P 500 go from ~670 in 2009 to ~2,100 in 2015. Now it is trading at roughly 1,870, and there are solid reasons for the pullback as traders continue to grapple with big issues that they can’t quite get their heads around.
What the markets need now in order for them to stabilise is:
- Oil stability;
- Chinese currency stability;
- Positive guidance on corporate earnings;
- The Fed to lower its rate hike expectations. (Yesterday, [Art] Cashin said we will see a 0% Fed Funds Rate before we see 1%.)
- Less uncertainty on global economic growth, (which is the biggest reason why crude is cratering).
The bottom-line: stocks will not find a bottom until at least a few of the above issues are addressed…
This basically sums up the laundry-list of worries that you’ll hear from investors if you ask, “What’s going on out there?”
What we know is that financial markets have been unsettled and economic data looks roughly mixed. The first part of that sentence is a new wrinkle, the second part is more of the same.
And so with the Federal Reserve appearing keen to continue raising interest rates and markets increasingly ready to find an excuse to sell, this is what we’ve got: red everything.