Investment performance made most investors a bit grumpy by the end of 2015, given that virtually every asset closed the year down a bit. During 2016, grumpiness is giving way to fear.
Here’s how the year began:
- On the first trading day of the year, China’s Shanghai index fell 7% intraday. Traders fled, triggering circuit breakers after China reported a fifth consecutive month of weak manufacturing data.
- Saudi Arabia severed diplomatic ties with Iran in response to the storming of its embassy in Tehran. Bahrain also cut ties with Iran. Oil prices rallied on the news, but stock prices fell.
- Bad news in China plus bad news in the Middle East equals bad news everywhere and a sharp selloff in equity markets. European markets dropped more than 2% across the board, Dow futures were down nearly 300, and S&P futures were trading down more than 1.6%.
Things have only gotten worse since then. By the time the market closed on Thursday, the Dow Jones Industrial Average was down 911 points – a drop of more than 5% in just four days. That’s the worst four-day percentage loss to start a year on record, according to FactSet stats that go back to 1897. The Nasdaq index, meanwhile, was down more than 6%, its worst start since 2000. (more…)