Markets rediscover volatility

So Chinese stocks fell by 9%, Alan Greenspan uttered the word “recession“, US stocks are down, credit spreads are widening, and emerging-market bonds are being hit. It’s time to take a step back. The Intrade recession contract is at an all-time low, showing a recession probability of just 16%. Spreads are widening, yes, but off of all-time lows themselves. The biggest risk in emerging markets is — well, there isn’t one, really. Maybe the Latvian currency peg. US inflation expectations are falling steadily. In other words, there’s no reason for a bloodbath. Chances are that prices will go down, and then they’ll go back up again. As you were.

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