Dow down 10% from its all-time high set in May of 2015
Is it time to panic?
A start to the year like we are having is attention grabbing. We have seen these events before and will see them again. You know Rutherford Investment Management as a long term investor and that has served our clients well over the years.
The markets and the economy were weak at the end of 2015 and getting weaker. The international monetary fund warned that the global economy was weakening; indeed they just downgraded global economic growth. The U.S. was finishing its 11th year of sub 3% growth. But on December 16, 2015, the Federal Reserve, citing an improving economy and incipient inflation, raised interest rates by 0.25 %, the first increase since June 2006.
To say they were backed into a corner would be polite. They had cornered themselves, by hawkish comments. If they had not raised rates, they would have lost credibility, but, at the end of the day, they had missed their opportunity and waited too long. By December, the U.S. and the global economies were slowing. No amount of gloss could make this sow’s ear a silk purse.
Almost immediately after the rate increase, the U.S. markets began to falter. Their end to the year was weak, and that weakness carried into the New Year.
Enter China: China is the second largest economy in the world, so it is significant when their economy slows. It has been slowing for some time. Indeed in August real weakness surfaced, and the Chinese and U.S. markets dropped sharply. The Chinese currency had just been admitted into a basket of world currencies by the IMF. This gave the Yuan new status and prestige. With their […]