Survey the Damage and Decide What to Do Next: Taking Stock

There was a sense of capitulation in global markets yesterday, with all European sectors in the red and the DAX entering a bear market. The Stoxx Europe 600 sunk 3.1%, its worst drop since the Brexit vote in June 2016. And yet today, Euro Stoxx futures are bouncing 1.6% ahead of the European open. How to handle the whipsaw?

The most affected sectors yesterday were naturally trade-sensitive segments of the economy like autos, but also financials. We focused on banks in Taking Stock yesterday and it seems their race to the bottom is far from over. Insurance, which is sensitive to global market returns, was also heavily penalized. Oil companies had an additional worry as OPEC couldn’t reach an agreement on production cuts, sending oil prices to plummet more than 5 percent. Defensives outperformed but the sell-off was broad-based.