Financial market snapshot September

Why are financial markets so scared about a quarter percentage point increase of the Federal Funds Rate? Because the hikes would not stop at + 0.25, but mark the beginning of new cycle of rising interest rates that may reach three or four percent just as its "normal" level. However, as there has been an overshooting downwards, there will also be an overshooting on the way up. When will the Federal Funds Rate reach five or six percent or even more? That is the question that troubles the markets. Financial market operates are scared because an interest rate back to normality of 3 to 4 percent would already imply an asset price contraction of 75 percent.

Financial Market Snapshot August

Why are global markets so scared about China? It is not 
economic growth per se that’s causing the fear but the risk 
that an enduring economic weakness of the Chinese 
economy could provoke the repatriation of asset from 
abroad, particularly a reduction of the Chinese holdings of 
US treasuries.
Any significant shift towards less dollar asset accumulation 
would provoke higher US interest rates irrespective of any 
FED actions. A surge of interest rates provoked by 
Chinese asset reallocation has global implications.
Such a change would not only be poison for the US bond 
and stock market, it could mark its arrow of death for US 
financial assets and a global meltdown.