S&P downgraded the US on Friday evening; the markets then had all weekend to work out what that meant, with the verdict arriving when markets opened Monday morning: stocks fell about 1.5% or so. That was about right, it seemed to me: the downgrade was important enough to take seriously, but not important enough to panic about.
And then stocks just kept on falling. As I write this, the S&P 500 is down 5.6% on Monday, wiping out a year’s worth of gains. That’s a big move, and no one knows where it might end.
From a market-dynamics perspective, we’re now in the world of momentum trades and falling knives. This isn’t a repricing of risk based on new information: it’s a trader’s market, which will move in the direction of inflicting the maximum amount of pain on the maximum number of people.
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