Now that the S&P 500 index has rebounded 6 percent from its Aug. 24 low, some commentators are saying the bloodbath is done. The S&P 500 plunged 11 percent between Aug. 17 and Aug. 25.
But not so fast, says Jason Trennert, chief investment strategist at Strategas Research Partners.
"The volatility is not over for two reasons," he told CNBC
. "One, we don't know what the Fed's going to do. Two, I think the China devaluation was a game changer. Until those two things are resolved, I think it's going to be hard for the market to make a big bounce from here."
As for the Fed, until this week many economists expected it to begin raising interest rates next month. But now some officials at the central bank say that might not be such a hot idea, given the stock market's volatility.
As for China, its decision to devalue the yuan two weeks ago (the currency has dropped 3 percent against the dollar) shows incompetence on the part of China's government, Trennert said.
The recent turmoil in financial markets has led some commentators to warn of a global crisis, but Ambrose Evans-Pritchard
, international business editor of The London Telegraph isn't so sure.
"It has been a frightening summer," he acknowledges. China's economic growth has slowed to 3 to 5 percent, economists estimate; its stocks have dropped 40 percent since June 12; and its currency has fallen 3 percent since the government's devaluation two weeks ago.
But, "in the end you have to make a judgment call on whether this tangle of cross-currents in the world economy really is the start of another wrenching global crisis, or just a tremor," Evans-Pritchard writes. "This time I refuse to join the pessimists."
He says U.S. economic growth is accelerating. It registered 3.7 percent in the second quarter. And "Germany is rock solid."
Of course things also looked good prior to the downfall of Lehman Brothers in 2008, Evans-Pritchard notes. "But this feels nothing like the prelude to the Lehman crisis, when the monetary data was flashing red warnings on both sides of the Atlantic, and US commercial lending was contracting at the fastest rate since records began."
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