Good morning!
Things are getting jittery again, at least for large caps. At the time of writing, the FTSE 100 Index (FTSE:UKX) is down 2.7% to 5,903, and the US Futures are also down nearly as much. Various problems seem to be causing this;
Oil - this has really dropped sharply again, with the US Daily Crude price that I monitor on IG having dropped from about $38 to $32 in the last 3 days. That causes all sorts of problems, not just for oil producers, but for Governments in oil-producing countries, which as we all know are often not the most stable countries in the best of times, let alone when facing severe budget deficits, currency issues, etc.
However, cheaper oil is a nice tax cut for companies and consumers in oil-importing countries, so my personal strategy of sticking to UK consumer cyclicals mainly, looks safe for the time being.
China - yes, this has reared its ugly head again, and is a similar situation to what we saw in Aug 2015. The Chinese stock market is trying to crash, but that is being prevented by the circuit breakers, which close the market once it's down 7%. This has happened twice this week now, and appears to be causing panic selling - since punters realise they only have a brief window after market opening to get their selling done.
Also the Chinese currency is devaluing apparently.
Chart courtesy of zerohedge;
** BREAKING NEWS - China has suspended the circuit-breakers on its stock market. (14:41, 7-Jan-2016) **
US economy - I'm reading things on the internet saying that there is an increased chance of a (probably short & shallow) US Recession. I'm no expert on that kind of thing, but it certainly makes me wary about opening new long positions, and I'm opening up some new US large cap short positions - as it feels to me as if things could get worse before they improve.
Small caps - thankfully, all the above has not really had much impact on UK small caps, which is similar to what happened in Aug 2015. Check out the chart below, for the last 5 days, for the various UK Indices - small caps (the top 2 lines, light blue & beige) have held up much better than large (resources sector-heavy) or mid caps:
