Don’t ever read too much into a single day’s trading action. But the reasons behind today’s massive selloff – in China, Europe and the United States – are instructive.
First, just like last year, there are worries about China’s economy. Data on Monday showed that Chinese factory output slowed in December. That stoked fears that Beijing’s economic stimulus measures aren’t working. Chinese stocks fell 7%.
Fears about China will likely persist throughout 2016. So will worries about the Middle East, where long-simmering tensions between Iran and Saudi Arabia flared over the weekend. The prospect of direct conflict between those two regional powers can’t be ruled out. That makes investors nervous.
And then there’s the US economy. Poking along, but not really strong. Manufacturing activity slumped for the second straight month in December. Interest rates are moving up, and a fractious, bitter political year is at hand. Not exactly a recipe for smooth sailing for your savings and investments.
With Your Money, I’m TM, Nightly Business Report.