In case you have not seen the news today (February 11th), global markets took a major hit. Asia was impacted the most, and in our globalized world, the rest of the globe followed suit. The Hang Seng (China) index lost over a percent. The Topix, a Japanese exchange fell 5.5 percent today, which capped off a 20 percent slide this month. The Topix hasn't fallen this much since 2008, when the Great Recession sent global markets into a downward spiral. This shows the seriousness of the situation.
As mentioned before, this situation wasn't only a Chinese or Japanese problem. The S&P 500 was down by as much as 2.3 percent today, before eventually rallying behind a surge in oil prices to end the day down slightly over 1 percent. If oil prices had not increased, the effect of the poor performing Asian markets would have been much worse. The reason that oil rebounded was speculation that producers may actually act to bolster the market.
I firmly believe that the sheer number of these occurrences point to a high probability of an upcoming economic downturn. I'm not saying that I believe this will be a downturn equivalent to the 2008 Great Recession, but I do believe that the economy will go into a recession within the next year. To bolster my hypothesis, remember that the economy tends to operate in cycles of 7-10 years, and it has been 7 years since the last recession. Therefore another one is likely due soon. What do you think? Is this just another case of volatile markets that have plagued the globe this year, or is it a warning sign? Will the economy continue to grow, or is a downturn on the horizon?
Link: http://www.bloomberg.com/news/articles/2016-02-11/global-bear-market-to-intensify-in-asia-as-investors-hunt-havens
I do agree with you Sam about the number of occurrences of instability in the market could point to another economic downturn, however it seems like if something does happen it will be much more mild than anything we saw in 2008. It seems like more than anything this time that there's just a sense of cautiousness and instability in the market due to many factors such as China, oil prices, interest rates, etc. With that being said, I think if we see stability in one of these factors I think we could see an effect of gradual stability in the others and the market in general. However, like I said before, if the market continues acting how it has been I certainly agree there could be a mild recession in the next few years.
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