Skip to footer

Why the stock swoon? Look overseas.

After a booming January through May, US stocks are coping with rising interest rates and concern for overseas markets. Investors should factor heightened market volatility in their decision-making. 

|
Junji Kurokawa/AP
A man looks at the update of the Nikkei stock rate on an electronic board in Tokyo, Thursday, June 13, 2013. Brown warnes that overseas volatility

The old playbook that worked from January through mid-May isn't working anymore.

Two reasons - first, US stocks are now coping with rising interest rates and the bond back-up. No one knows whether or not that's done for now. The yield on the 10-year, at 2.29%, is sitting at 14 month highs. Can't be ignored.

This means the yield plays at best can stabilize but should probably not be loaded up on.

Secondly, we're starting to pay more attention to the overseas stuff. We ignored the fact that European stocks, relative to US stocks, had peaked last December. We also ignored the China decline, month after month.

Not anymore. Look at Tuesday morning's action in Citigroup. It was everybody's favorite bank turnaround story, just as the XLF sector SPDR was starting to lead the market. Now we get chatter of a massive currency-related loss and that whole bank leadership heuristic gets thrown for a loop.

The new drivers of fear in US stocks are emerging markets and Japan. Tuesday's sell-off comes courtesy of an EM bond / currency rout overnight combined with a lack of new action from the Bank of Japan.

What this means is that elevated volatility needs to factor into your decision-making. I'd say position-sizing should probably come down as well. Lastly, I'd imagine that getting accustomed to gap-up and gap-down opens would be a good idea as well. We hadn't seen a lot of those until the international stuff came back into focus, but if you remember this type of trading from years past, then you remember the frustration of markets that didn't move all day, only in the futures markets before the open.

This is where we are, just so you know.

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.
editor@csmonitor.com
Subscribe
Mark Sappenfield
Editor

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

Subscribe to insightful journalism

QR Code to Why the stock swoon? Look overseas.
Read this article in
https://www.csmonitor.com/Business/The-Reformed-Broker/2013/0613/Why-the-stock-swoon-Look-overseas
QR Code to Subscription page
Start your subscription today
https://www.csmonitor.com/subscribe