Stocks dropped substantially on Monday but the out-sized declines in stocks do not mean that the Evergrande saga deteriorated (it did not, at least not from where it was on Friday), and as such our opinion on Evergrande (that it’s a China problem, not a contagion problem) remains intact.

More broadly, we have been warning for some time this market was vulnerable to an “air pocket” and we hit it yesterday, as at the lows the S&P 500 was down 5% from the all-time highs.

With regards to “When will it end?” this pullback was caused by (1) Investor complacency and (2) Investors being forced to address a series of substantial unknowns (Fed tapering, Washington budget battles/shutdowns/debt ceiling, global growth worries). Positively, investor complacency has been removed. So, for this market to put in a tradeable bottom, we now need to see that uncertainty resolved.