It has certainly been a challenging start to the year – even for someone like myself who has been quite cautious (see “2016 Outlook: And the Chickens Come Home to Roost,” published on December 21, 2015). Bearish predictions abound, and market participants have been shaken by the violent sell-off across risk assets and around the globe.
Market psychology appears damaged, and the muscle memory from the Great Financial Crisis has kicked in like a bad cramp in the middle of the night. Negative feedback loops seems to be trending, and while the bears are loud and proud, the bulls seem to have been taken to slaughter. The good news is that we are set up for a nice bounce in asset prices; the bad news is that such a bounce is likely to be just that – a bounce.