This is not the end for financial markets

If you’re surprised by what’s happening in the financial world right now, you probably haven’t been paying much attention. Stock prices were incredibly high, and many investors were massively overleveraged. The Dow Jones Industrial Average fell more than 1,000 points on Monday, and stock prices are still incredibly high, and many investors are still massively overleveraged. In the days ahead, we’re going to see some spectacular ups and downs, and this tragedy is going to take some time to fully unfold. But there’s no doubt that we have a major problem on our hands.

After the chaos we witnessed on Friday, I wasn’t sure we’d see even more carnage on Monday, but that’s exactly what happened…

The Dow Jones Industrial Average fell 1,033.99 points, or 2.6%, to close at 38,703.27. The S&P 500 fell 3%, to end at 5,186.33. Both indices posted their worst daily losses since September 2022.

The tech-heavy Nasdaq Composite index lost 3.43%, closing at 16,200.08 points.

At one point, the Nasdaq was down more than 1,000 points.

This is the first time in history that this has happened.

If you can believe it, there was a time early Monday when tech companies had collectively lost nearly a trillion dollars in market capitalization.

Tech stocks rebounded a bit the rest of the day, but the Magnificent Seven are still collectively down about $3 trillion from their record market caps.

That’s a lot of money.

Over the past three trading sessions, the Dow, S&P 500 and Nasdaq have all been completely crushed…

The Dow Jones fell 5.24% over the past three trading days, recording its worst three-day loss since June 14, 2022, when it fell 5.91% in three days.

The tech-heavy Nasdaq Composite Index fell 7.95% over the period. This was the biggest three-day decline for the Nasdaq since June 13, 2022, when it fell 10.57% over a three-day period.

The S&P 500 lost 6.08% in three days, its biggest decline since June 14, 2022, when it lost 7.03%.

But in Japan, things were even worse.

On Monday, the Japanese experienced a stock market crash of epic proportions…

In Asia, Japanese stocks confirmed a bear market overnight as Asia-Pacific investors got their first chance to react to disappointing US jobs figures released on Friday. The Nikkei’s 12.4% loss, which closed at 31,458.42 points, was the index’s worst day since the 1987 “Black Monday” that hit Wall Street. The index’s 4,451.28-point loss was also the largest in terms of points in its history.

The good news is that we’re about to experience a dead cat twist.

As I write this article, Japanese stocks are rebounding dramatically, and the same could happen to U.S. stocks when markets open here.

So why does this happen?

Some blame this problem on the bad economic news we are receiving and the inaction of the Federal Reserve.

Others suggest that what we are seeing “is the result of investors having to untangle complex and highly leveraged transactions”…

But economists say falling stock prices are not a sure sign of a recession. The current slide, they say, is the result of investors untangling complex, highly leveraged transactions that have artificially boosted stock values.

The truth is that many factors come into play.

But after several years of one-way traffic, many people are quite shocked by how quickly stock prices have started moving in the other direction…

“Investors have become so accustomed to stock markets only moving in one direction that they suddenly realize that stocks can also go down,” said Torsten Sløk, chief economist at Apollo Global Management. “We are in a situation where a single weak point – Friday’s jobs data – has brought the bears out of hibernation.”

For a long time, the Federal Reserve and other global central banks have artificially propped up financial markets.

Now that the artificial support has been removed, and many are struggling to “adjust to the end of easy money on a global scale”…

“This is not a recession train, this is just a good old stock market panic,” said Joe Brusuelas, director and chief economist at RSM US. “This is not a Washington-inspired event, a jobs market slowdown or a Fed delay. This is a broader regime change, where investors are adjusting to the end of easy money globally.”

Of course, the Fed could choose to intervene at any time.

Now, optimism is growing that the Fed will come to the rescue with an emergency rate cut.

In fact, many bond traders are betting big that this is about to happen…

Bond traders are rushing to see the U.S. economy deteriorate so quickly that the Federal Reserve will have to start easing monetary policy aggressively — potentially before its next scheduled meeting — to avoid a recession.

I wouldn’t recommend holding your breath waiting for that to happen.

The Dow would likely have to fall at least 35,000 points before the Fed would consider an emergency rate cut.

But I think there probably will be one at their next scheduled meeting.

Of course, a rate cut isn’t really going to save us from what’s ultimately going to happen.

As James Howard Kunstler so aptly noted, “Whatever can be broken, breaks”…

The wait is over. Everything that can break, breaks.: the stock markets, the bond markets, the galaxy of derivatives — bets on this and that, which will never be honored. The banks are next. Gold and silver are clinging to their survival for now, because they actually have value.

This does not mean that every day will be a down day for financial markets.

During bull markets, the waters are calm and stock prices tend to rise slowly and steadily.

During bear markets, the waters become very choppy and there are violent ups and downs.

If the Dow Jones climbs several hundred points in a single day, don’t assume that the crisis is over. A sharp swing in either direction is a bad sign.

Also, please understand that we are not yet close to the center of the storm.

What we are experiencing now is just the beginning of the turbulence. Real suffering is not expected to come for some time.

Michael’s New book titled “Chaos” is available in paperback and for Kindle on Amazon.com, and you can subscribe to his Substack newsletter at michaeltsnyder.substack.com.

About the Author: Michael Snyder’s new film book titled “Chaos” is available in paperback and for Kindle on Amazon.com. He has also written seven other books which are available on Amazon.com, including “End Times,” “7 Year Apocalypse,” “Lost Prophecies Of The Future Of America,” “The Beginning Of The End,” and “Living A Life That Really Matters.” When you purchase any of Michael’s books books You help support the work he does. You can also get his articles delivered to your inbox as soon as he publishes them by subscribing to his Substack newsletter. Michael has published thousands of articles on The Economic Collapse Blog, End Of The American Dream, and The Most Important News, and he still freely and happily allows others to republish these articles on their own websites. These are very turbulent times, and people need hope. John 3:16 tells us about the hope God has given us through Jesus Christ: “For God so loved the world that he gave his only begotten Son, that whoever believes in him should not perish but have eternal life.” If you haven’t already, we urge you to invite Jesus Christ to be your Lord and Savior today.