The Four Charts That Should Have You Worried

Atrocious.

Over the past 3-4 weeks, the market is experiencing something it really hasn’t seen since 2022 - a true downswing in investor sentiment.

Sure, there was the 9% correction that occurred during the yen carry trade reversal in the late summer of last year. But that only lasted a couple weeks. Some of the signals flipped to risk-off and several defensive assets began to lead, but there was never really the sense of dread. The S&P 500 regained virtually all of that pullback within a few weeks.

There was the 10% correction that occurred from July to November in 2023, but the VIX only closed about a half dozen times above even the 20 level. There was very little volatility to speak of throughout that stretch and almost no indications of panic.

This environment, however, feels different. Investors seem genuinely worried. The trade war has thrown all kinds of chaos into the markets. Inflation is still above trend. It seems realistic that GDP growth could turn negative in Q1. The uncertainty of everything seems to be taking an emotional toll and I think that’s a big reason why selling pressure has remained persistent throughout this run. Even brief rallies are being sold pretty quickly.

Beyond the feelings, though, there are numbers backing up why this environment is changing and why the worst of it may be yet to come.

Let’s take a look at four rather ominous charts that signal trouble.