Markets No Longer Calm as Contagion Becomes a Real Fear

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$1.7 Trillion has been wiped away from global stocks. Emerging Markets from Korea to Turkey to Argentina have seen sell offs. Investors are easy to panic, and so “selling can start anywhere.”

Bloomberg interviewed Khiem Do, head of Asian multi-asset strategy with Baring Asset Management in Hong Kong. He notes, “the correction is long overdue.” President of Cambiar, Brian Barish notes, “You’re never fully prepared for something like this. You say to yourself, I know the froth is picking up, I know this is starting to get a little out of hand, this is going to get ugly when the hammer comes down. You know all of that, but you just don’t know what is going to get sold and why and by who.”

  

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Good forecasting models utilized by the best analysts at top firms and funds still have never been perfect to this day. A good unforeseen sell off brings more panic into the market then the crumbling of governments. Predictably, as the returns on the emerging markets dipped, gold picked up. Investors also note that the Federal Reserve is cutting back with its stimulus. That should incite investors to fly back to the safe haven metal.

The MSCI Asia Pacific index dropped by 1.5 percent, India’s rupee weakened by .5 percent against the U.S. dollar and the Indonesian rupiah slide by .4 percent. Since 2008, this is the worst performance seen by the Emerging Markets.

Image: Nasdaq