..Think of market fragility in an interconnected global marketplace.
..The crisis need not necessarily stem from within US, it could come from Japan, it could come from EU, it could also be China. But when you push the fragile global market and financial system into the brink of tipping over, the problem or crisis isn't going to stay within the source of the problem....rather, it would reverberate across the world,....remember the UK gilts crisis? the Credit Suisse crisis? and more recently the yen carry trade reversal mini-hiccup?
...when you have fragility in an interconnected world swimming under a mountain of debt, economies tipping over can easily throw the global markets into a systemic crisis....with counterparty default risks blowing up.
...and definitely no help despite central bankers working up their arse to stem the implosion or any implosions to have a Commander in Chief Master of Chaos creating chaos after chaos via self inflicted actions.
Someone asked me: “How low do you see the S&P 500 going?”
The short answer? I won’t give a prediction — because predictions are always wrong.
But I will walk you through the logic. Markets don’t fear “slowdowns.” They fear traditional recessions. The kind with real GDP contraction, negative payrolls, and financial shock. And we might be on the edge of one.
If we do enter a traditional-style recession — with all the classic signs — there’s a lot more downside to the S&P 500 than people realize. Historically, recessions shave off about 30% from the top. Not a perfect comparison — every cycle is different — but it gives you a frame.
Now consider the added layers: The AI bubble shows signs of cracking. Credit spreads are widening — signaling growing fear. Monetary collateral issues could arise if junk credit markets freeze up.
Put that together? We’re looking at a potential multi-phase selloff. Not just because the economy slows, but because the market structure is fragile.
Even if we don’t get a classic recession, the worst-case macro scenario is nothing changes. That the world continues forgetting how to grow. Stocks might rally in that case… but it would be built on illusion.
In short: There’s way more risk to the downside than most are prepared for. And this time, it’s not just about earnings or interest rates — it’s about system fragility.
