It’s ugly out there — but don’t hit the panic button yet

Your 401(k) balance is gonna be OK. [Bloomberg]( This is Bloomberg Opinion Today, a market bloodbath of Bloomberg Opinion’s opinions. [Sign up here](. Today’s Agenda - Global [stock market]( rout. - The BOJ [loses]( some clout. - Rate cuts? [Highly doubt](. - Warren Buffett [cashes out](. A Series of Unfortunate Events If you were to challenge me to explain what is going on with the stock market — without any assistance from [Victoria Beckham]( or [Jesse Pinkman]( or [Kyle Richards]( — maybe I’d say this: Last week, the Fed didn’t cut rates like [everyone]( [was]( [hoping](. Then US jobs data came in shockingly low. The Bank of Japan raised rates at the worst possible time, leaving the yen-carry trade camp scrambling. Over the weekend, Warren Buffett added to the chaos when he announced he sold half his Apple stock and now has a huge pile of cash. Today, the S&P 500 had the biggest [one-day drop]( since September 2022 and everyone with a 401(k) is freaking out. Traders want the Fed to do an emergency rate cut to calm things down. As you can see, there isn’t One Big Thing we can blame the market rout on. On one hand, that’s good, because it means there’s no catastrophic emergency that’s railing the economy à la Covid-19. But on the other hand, the lack of a clear culprit makes this sequence of events rather messy and confusing. In an attempt to remedy that, here’s a more in-depth recap from our columnists. When the US [unemployment rate]( surged to the highest level in nearly three years on Friday — exceeding all 69 estimates from economists surveyed by Bloomberg — it [triggered]( Claudia Sahm’s namesake indicator, which says the economy is already in a recession once the three-month average of the unemployment rate rises at least a half percentage point above its low in the past 12 months: “If the market expectations of a US recession turn out to be true,” Gearoid Reidy [says]( the Bank of Japan’s move “will prove to once again have been spectacularly poorly timed.” The bank’s July 31 rate hike decision “has been followed by a market bloodbath of almost unprecedented levels,” he writes, but it appears to be more of an unfortunate coincidence than malpractice. What’s the connective tissue between Japan and the US? John Authers [explains]( “Japanese investors love putting their money to work overseas. Combine the extraordinary performance of the US stock market with a historically weakening yen, and the result for Japanese investors is fantastic,” he writes. “Meanwhile, foreign investors also like borrowing in yen and parking elsewhere via the carry trade. Like Mrs. Watanabe, the mythical Japanese retail investor, these people will be burned, and their actions as they try to minimize the pain could make the situation worse. By liquidating their foreign holdings and bringing money home, they drive the yen up further.” Wall Street’s so-called “fear gauge” — the volatility index — is through the roof. And bright minds are cooking up nightmare nicknames for the event: “Volmageddon is kinda lame. We need something for the ninja element,” Steve Hou [tweeted](. Kyla Scanlon [offered]( “Yenvolcalypse,” which feels appropriate: Over the weekend, Warren Buffett added fuel to the fire when he announced Berkshire Hathaway slashed its stake in Apple. As John puts it: “The sight of the world’s most respected investor getting out of one of the Magnificent Seven and building a [$276.9 billion cash pile]( for the buying opportunities he sees ahead is not good for rattled sentiment.” Jonathan Levin [agrees]( “At [noon in New York], the S&P 500 Index had plummeted around 3%. I have no idea what proportion of that reflects Buffett, but it’s fair to say that his unfortunately timed disclosure was part of the ssentiment stew.” “If we really are heading into recession, there’s not much disagreement on what the Fed should do: Cut interest rates a lot and fast,” Conor Sen [writes](. “Swift rate cuts would relieve pressure for Americans struggling to make payments on floating-rate credit card debt or to get financing for a new car.” Some folks — [including]( Wharton School Professor Jeremy Siegel — want the Fed to do a 75 basis-point emergency cut to its funds rate now. But Marcus Ashworth [says]( that’s “highly unlikely,” considering what we’ve seen in the past. “Emergency rate cuts [do happen]( he writes, “but they’re relatively rare, and are only employed when the economy is facing a sudden seizure.” Think: March 2020, the global financial crisis and the 2001 tech bubble burst. Instead, this kinda feels like a repeat of Black Monday in 1987. Veteran market observer Ed Yardeni [walked through]( the comparison on Surveillance today: “We had a crash in the stock market — that basically all occurred in one day — and the implication was that we were in, or about to fall into, recession. And that didn’t happen at all. It had really more to do with the internals of the market.” Which lines up with what Matt Levine [says]( in his newsletter: “All the big trades tend to unwind at once.” It’s ugly, sure, but not the end of the world. Telltale Charts There are many ways to try and prevent cancer. You can wear sunscreen. You can exercise. You can forgo tobacco and carcinogens. But there’s one thing that you’re probably not thinking about, and it’s alcohol. F.D. Flam [says]( drinking is “one of the top risk factors — and yet doctors aren’t talking to patients about its connection to cancer.” It matters, especially for women: “Alcohol consumption accounts for about 16% of breast cancers,” according to the lead author of a new study F.D. cites. “Most of the increased risk is attributable to people who exceed the current health guidelines of no more than one drink a day for women. But even a drink a day raises risk — especially if you’re filling up a big wine glass.” In an effort to have a more nuanced discussion about the state of health care for trans children, Lisa Jarvis [spoke]( with Jack Turban, author of [Free to Be: Understanding Kids and Gender Identity](. “Republicans are guilty of using inflammatory rhetoric that’s misleading (like “sterilizing” children, “mutilating” children). That’s one end of the extreme. But on the other end, I don’t know that I hear a lot from the left, and in particular from politicians who have big platforms, that they’ve really dived into this in a nuanced way to be able to say, ‘Actually, not all trans kids do want medical interventions — and the important thing is that we have comprehensive evaluations to understand the nuances of these kids,’” he told her. That politicization is reflected in the numbers: “[More than a third]( of transgender adolescents and teens, or about 113,000 youth, live in a state that has passed a law banning access to gender-affirming care,” Lisa writes. Further Reading The US and its allies need [better tools]( for combating hostage diplomacy. — Bloomberg’s editorial board Project 2025 reads more like [Project 1925]( when it comes to energy. — Liam Denning The Harris campaign is shrewd to be [keeping it weird]( against Trump. — Tim O’Brien After [Southport]( the power of inflammatory social media cannot be ignored. — Martin Ivens Yes, New Jersey can [ban the AR-15](. Here’s why. — Noah Feldman US debt levels are nearing the point where the only [“remedy”]( is catastrophic. — Clive Crook What do [graduates]( of Yale Law School know about economics? — Allison Schrager ICYMI A judge says Google [violated]( antitrust laws. RFK Jr. dumped [a dead bear]( in Central Park. [Snack M&A]( is alive and well. Olympic Kickers A speed-walker [celebrated]( too soon. She wanted to [bite her medal]( too. Kristen Faulkner has lived [a thousand lives](. Roses are red, violets are blue … [this pole vaulter]( has a new poem for you. The first [all-Black podium]( in Olympic gymnastics history: Notes: Please send snacks and feedback to Jessica Karl at jkarl9@bloomberg.net. [Sign up here]( and follow us on [Threads]( [TikTok]( [Twitter]( [Instagram]( and [Facebook](. Follow Us Stay updated by saving our new email address Our email address is changing, which means you’ll be receiving this newsletter from noreply@news.bloomberg.com. Here’s how to update your contacts to ensure you continue receiving it: - Gmail: Open an email from Bloomberg, click the three dots in the top right corner, select “Mark as important.” - Outlook: Right-click on Bloomberg’s email address and select “Add to Outlook Contacts.” - Apple Mail: Open the email, click on Bloomberg’s email address, and select “Add to Contacts” or “Add to VIPs.” - Yahoo Mail: Open an email from Bloomberg, hover over the email address, click “Add to Contacts.” Like getting this newsletter? 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