Wall Street is at its gloomiest since 2009. China's slowdown, plummeting commodity prices, and flattening corporate profits have frayed nerves. Star bond-fund manager Jeff Gundlach stated late last year that if oil prices got down to $40 per barrel, that would indicate that "something is very, very wrong with the world." Oil's price as I write this is $30.14. Royal Bank of Scotland went further, issuing the direst client warning I have ever seen from a mainstream investment firm. RBS says that 2016 "looks like 2008." It advises to "sell (mostly) everything."
While I am generally of a sanguine nature, I confess to being uncomfortable as well. Today's bear theory is sounder than most. No question that China and other developing markets have spent heavily on capital investments; that commodity companies have responded by expanding capacity; that the combination of those two activities has juiced the global economy; and that both those booms have faded. Sometimes the pessimists fake it--such as 2009's baseless speculation that stocks would suffer because of "uncertainty" about future U.S. tax policy--but in this instance the concerns are real.