 The Market Sum | Insight after the bell
By Caleb Silver, Editor in Chief Monday's Headlines 1. U.S. Markets Hit by Global Fears 2. Hong Kong Protests Prompt Investor Concerns 3. Argentina Plunges as President Suffers Primary Defeat 4. The Ponzi Scheme's Anniversary Markets Closed
 Markets Today
Today was the kind of day you wished you could've rolled back into Sunday—at least for investors in North and South America. U.S. markets, still smarting from last week's dizzying declines, sold off throughout the day as losses deepened by the close. The DJIA shed 1.5%, while the Volatility Index spiked 17%. Welcome to the week!
Concerns about the escalation of protests in Hong Kong and China's potential response, coupled with the surprise election results out of Argentina, where President Macri was delivered a primary defeat, roiled markets up and down the East coast of the Atlantic Ocean.
Let's start in the Northern hemisphere first. Here are four headlines from research reports from the top investment banks in the U.S.
It was that kind of day.
Read more: Why We Might Already be in a Bear Market
The notion that we might already be in a bear market seems counterintuitive, given that the S&P 500 has only fallen about 5% from its recent all-time highs. A bear market is typically considered to be a 20% or more decline from recent highs.
But, as we pointed out last week, the S&P 500 is basically flat from where it was a year ago. Morgan Stanley's research team says we are in a cyclical or rolling bear market that has ravaged stocks sectors one at a time, rather than dragging the whole market down with it. Per the report, 80% of the stocks in the S&P 500 are down 10% or more from their recent highs. Most other major U.S. markets are also down 10% from recent highs.
While market fluctuations are de rigueur, the speed of those fluctuations lately, has sapped the spirit of individual investors, who now feel more bearish than they have all year, per the American Association of Individual Investors. source: https://www.aaii.com/sentimentsurvey  Consumer Still Holding on...for Now As we know, the U.S. consumer has been resilient in 2019 despite many reasons to become fearful. They've continued spending with confidence even in the face of an intensifying trade war, volatility, and predictions of a looming recession. But, the disconnect between consumer sentiment and individual investor sentiment may start to shrink, which could lead us into a real bear market and recession faster than we think. Here's Bank of America's chart showing individual investor sentiment in yellow, consumer sentiment in blue, and past recessions in gray.  Hong Kong Unrest The headlines were heavy this morning with news of more political unrest in Hong Kong as protesters took over the international airport and flooded the streets. The issues in Hong Kong are deeply rooted as it relates to its relationship with China, which took the administrative region back from British rule in 1997 after 150 years.
The BBC has a good timeline, if you are interested.
Protesters have been taking to the streets relentlessly for the past two months, angered by Hong Kong's leaders' decision to extradite criminal suspects to China to stand trial. I know I'm over-simplifying the issue—but the concern is that China is backing a crackdown against the protesters that could turn into a Tiananmen Square-type of event.
Hong Kong has become a key financial center in Asia, where nearly every major bank and financial institution has a large presence.
Read more: Why Hong Kong Needs Autonomy to be a Global Financial Center
Here's how Hong Kong's influence as a banking center has grown over time. Hong Kong is in yellow. chart courtesy zyen.com  If the protests continue, and China's response becomes heavier, one of the main concerns from an economic standpoint is that all of the banking activity that runs through Hong Kong will come to a standstill. That could paralyze the region and the global banking system, thereby accelerating the economic slowdown that is already gripping the Asia Pacific. China is effectively battling on multiple fronts: the trade war with the U.S., a slowing domestic economy, and the civil unrest in Hong Kong.  Argentina's Election Surprise Argentina's presidential primary election surprised many people, but probably no one more than current President Mauricio Macri. Macri, a pro-business conservative leader, lost the primary to Alberto Fernández, a leftist whose vice-presidential running mate is former president Cristina Kirchner, a nationalist. The main elections are in October, but the primaries are traditionally a good indicator of what to expect in Argentine politics.
Macri has run a business-friendly government that has boosted the Argentine stock market to be one of the best performing in the world (until today), but it has been at the expense of rampant inflation and a grueling recession.
The results of the primary shook Argentina's stock and currency markets, causing a massive selloff and concerns about Argentina's debt.
The Merval, Argentina's major stock market, shed 33%, while the Argentine peso shed nearly 25% of its value to around 59 per U.S. dollar shortly after trading opened. The peso had been at 45.25 at its previous close. According to traders cited by Reuters, the peso then hit a record 65 per dollar to mark a 30.3% loss.
Here's the Merval today: 
chart courtesy www.koyfin.com  Amgen's stock continues to climb higher, up by almost 5% today, following the biopharmaceutical company's victory in the Enbrel U.S. patent case from last Friday. Shares of CenturyLink rose by nearly 4% after revealing that it plans to invest millions of dollars in edge computing services.  Nektar Therapeutics' stock decreased even further since the announcement last Friday of its manufacturing issues regarding two new cancer drugs, now down by more than 11%. Shares of Mosaic fell by just over 8% amid news that the fertilizer production company shut down one of its potash mines and laid off nearly 400 employees.  Nigeria occupies a very lonely winner's circle as the only positive performer today. While the remaining countries all suffered a loss, it was Argentina that fell astonishingly further than anyone else. Word of the Day: Contagion is the spread of market changes or disturbances from one regional market to others. It can refer to the diffusion of either economic booms or economic crises throughout a geographic region. Contagions occur both globally and domestically, but they have become more prominent phenomena as the global economy has grown and economies within certain geographic regions have become more correlated with one another. Many academics and analysts see contagion as being primarily symptomatic of global market interdependence. photo courtesy umass.edu Today in Financial History Aug. 12, 1920: Charles Ponzi is arrested for financial fraud in Boston after taking in more than $6 million from thousands of investors. He repaid each $1,000 invested with $1,500 just 90 days later—but only by taking more money from newcomers or, as a judge later puts it, robbing Peter to pay Paul. Such pyramid arrangements are forever afterwards known as Ponzi schemes. Mitchell Zuckoff, Ponzi: The Man and His Legendary Scheme (New York: Random House, 2005), p. 280; http://www.mark-knutson.com/
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Monday, August 12, 2019
A World of Worry
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