Equities Slide, the Evergrande Collapse, and a Look Ahead at This Week’s FOMC Meeting
September 20, 2021 | FIRESIDE CHARTS
It’s a grim start to a big week as stocks slide and risk-off sentiment takes hold. Though inflow and outflow patterns might suggest otherwise, small caps were the only hold out last week as all other major U.S. indices closed down. More difficulty is anticipated this week as the fallout from the debt-induced collapse of Evergrande—one of China’s largest property developers—continues. Shares sold off dramatically on fears the firm may default on $300 billion in debt in what could have a “domino effect” on China’s also-heavily-leveraged property sector… and global markets. Back in the U.S., yields climbed ahead of this week’s FOMC meeting in which tapering is sure to be a hot topic of discussion. With the QE effort still running strong and Fed assets at staggering heights, how will the markets react to any potentially-more-actionable talk of an unwind?
- ‘Tis the season; of the major U.S. indices, only small caps eked out a small gain last week:
Source: The Chart Store, from 9/19/21
2. Despite massive buying, all but small cap was down last week…
Source: BofA Global Research, from 9/20/21
3…and yet there were some major outflows in small caps yet they rose in price…
Source: The Daily Shot, from 9/20/21
4. Not only is it “the season” for market corrections… we have warned about Chinese debt several times and today’s news on Chinese lender Evergrande is weighing heavily:
Source: The Daily Shot, from 9/20/21
5. Here is the stock chart for the lender in question:
Source: The Daily Shot, from 9/20/21
6. But Evergrande is NOT the only Chinese property lender facing a massive debt wall similar to Greece during the European Financial Crisis:
Source: Bloomberg, from 9/20/21
7. Yields rose last week despite stocks taking a breather, CPI report as expected, and the FED’s QE running hard:
Source: The Chart Store, from 9/19/21
8. Cause and effect or effect and cause?
Source: The Daily Shot, from 9/20/21
Disclosure: The charts and infographics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are they a recommendation to take any action. Individual securities mentioned may be held in client accounts. Past performance is no guarantee of future results.