What we're seeing in markets is a landscape where no one wants to hold excess stocks or bonds. Cash is king and the US dollar is still the best cash in the world.
It's as simple as that.
Strategies that were running at 2:1 leverage are going to 1.5:1 or 1:1. The result is selling and there's no one wants to step up and buy tech stocks in freefall or anything else. The amount of leveraged cash in the system is going down, in part because it's no longer free to borrow money.
I wrote more about this yesterday: What is deleveraging and why it's so frightening
When does it end?
There's no telling when this will stop. You can look at P/Es or EV/EBITDA or dividend yields but when bond rates are going up, dividend yields become less competitive. Ultimately, the only thing that matters is price and sentiment. Needless to say, it's not good.
