Okay, let’s have a show of hands: who thought Europe’s sovereign-debt crisis was over? Anybody? Bueller? Bueller? Who’s that with your hand up? In the back?
Oh, it’s you, Mr. Market. Mr. Market, tsk tsk.
Today’s sell-off is being pegged in some part on Moody’s downgrade of Spain, which “reignited” fears of that Europe’s sovereign-debt problems are still, well, problematic. You can almost forgive the market for taking its eyes off this particular ball. After all, the Fed’s been buying the drinks since August, and the market is never one to look that gift horse in the mouth.
Then, too, the news this past month or so has been dominated by the Jasmine Revolution spreading across North Africa, and there’s been a recovery here in the U.S., the sustainability of which is a constant source of obsession (and rightly so.) And the Charlie Sheen thing’s been going on for years. At least, it feels like it’s been going on for years.
But it’s hard to believe that the market was really shocked by the Spanish downgrade. The fact is the U.S. stock market is due, overdue, for a correction, and even despite the central bank’s best efforts, one is going to come. Call it gravity. The news, the trigger for the sell-off, it’s just an excuse.
To be sure, there was a notable confluence of bad news today. Besides the Spanish downgrade, there was a surprising jump in jobless claims, and a surprising widening of the trade gap. These two combined to take the enthusiasm over the economy recovery down a few notches (no surprise to regular readers of this blog, to be sure.)
But the fact is, stocks are and have been overbought for some time now, and the recent reappearance of that particular species, the retail investor, that seems to come out the most at market tops only made the market even more top heavy. Woe be to the last one into a crowded trade.