Stock Market Selloff Continues, Expect Further Losses

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Source: Istock

“This rally doesn’t look convincing, making us suspect that the fall in US equities and commodities might not be over.”

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That was us just a few weeks ago when US stocks were trying to come off new lows established in August. During the last few days, sellers were back in control of the stock market, sending shares, once again, to their lowest levels of the year.

S&P 500 one year out

S&P 500 1 year out. Graph: @StockCharts.com

The Federal Reserve‘s decision to wait to raise interest rates helped the market. Based on how stocks reacted, it looks like the decision left most investors convinced that the Fed lacks confidence in the US and global economy. Not even a stronger-than-expected Q2 GDP number helped the market.

Free Download: Latest Metal Price Trends in the September MMI Report

China’s slowdown is the overriding theme for US stocks right now. China’s stock market is the best benchmark of its economy. We don’t expect China’s economic situation to start improving until we see its stock market bottom out. So far, Chinese shares are still at their lowest levels and pointing downward.

FXI China ishares 1 year out

FXI China ishares 1 year out. Graph: @StockCharts.com

What This Means For Metal Buyers

We are not only talking about stock markets just because your 401K is suffering. The decline in US equities highlights the continued bearish sentiment about China, which will continue to impact commodity prices. We see no sign that the worst, for both stocks and commodities, is over yet.

 

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