This past weekend was bookended by two gargantuan sell-offs: A 666-point drop in the Dow on Friday (spooky!), followed by 1,175 on Monday, the biggest one-day drop in the index's history.
I won't say "I told you so," but if you took my advice and converted 60% to 70% of your assets to cash by the end of January, you should be breathing a sigh of relief right now.
As the week grinds on, we're seeing a bit of recovery, but I should warn you – don't be too sanguine.
Officially it takes two quarters in a row of falling GDP for the NBER to call a recession. By the time that second GDP report comes out, a recession will have already been under way for seven to nine months. The Fed probably will not reverse its quantitative tightening program, which actually sucks money out of the financial market ecosystem, until at least then. With no economic slowdown even in sight, it is virtually certain that tightening money will be with us at least throughout virtually all of 2018.
That's plenty of time for tight monetary policy, which the Fed euphemistically calls "normalization," to cause considerable damage to stock prices. Apparently that damage has begun this month.