Is This 2016, or 2008?

As we expected, it’s been a rough start to 2016. So far key equity markets have successfully tested the August bottom – small-cap and mid-cap stocks have not. The equity risk premium hasn’t quite reached the panic levels of October 2014 or August 2015, so perhaps we haven’t quite seen the ultimate selling climax. But signs of capitulation are all around, including panic mongering by Soros and Summers. Fickle Bullard has started to fret about falling inflation expectations, perhaps signaling capitulation by the Fed in the face of a horrible reaction to “liftoff.” The yuan devaluation that has panicked markets is a positive development, but with some externalities for emerging markets, yet not likely a systemic risk. Fundamentals in oil markets are in flux with Iran sanctions set to end shortly, and Saudi talking about taking Aramco public. But we continue to think oil is putting in a “sloppy bottom,” which points to an end to growing credit stresses.