The markets moved dramatically up and down in the third quarter, ending down. The volatility and decline seems out of sync with the U.S. economy which has continued to show growth, albeit without much in the way of animal spirits. The U.S. has a historically low unemployment rate, exhibits decent growth in consumer spending and shows improved housing prices and low inflation.
But, investors do not like uncertainty. A combination of factors and fears of the unknown appear to be at play. It is noted that the most dangerous times for financial markets is when “stories” become broken. A whole crop of stories broke down in the third quarter from “Invincible China” to “Energy Demand Always Growing Faster than Supplies.” This in turn has resulted in multiple levels of uncertainty: