The Federal Reserve meeting on Wednesday will dominate the economic calendar for this week.

– Continued sell-offs in high-yield bonds and commodities indicate that all may not be well in the global economy, and a rate hike from the Fed may make this situation worse.

– After the FOMC held rates in September, global markets sold off. So if they hold in December, we may see an even more vicious sell-off as fear permeates the global economy. The Fed is between a rock and a hard place here. Expect heavy volatility regardless of the outcome.

This was an interesting summer for markets. A perfect storm of risk was converging on global equities, as a commodity sell-off combined with a meltdown in Asia while the Federal Reserve was looking to raise rates all seemed to nudge investors into more risk-averse portfolios. It started with selling out of China in June and July, as the massive run in the stock market that saw Chinese equities move up by more than 150% in less than a year came to a screeching halt. At first, this seemed to be isolated to China, and after such a massive run in prices over the previous year, at least initially, this selling looked like a garden-variety pull back.

But by August, this selling had moved into other economies in Asia and we started to see the Nikkei get hit. A weakened European economy was next, as European stocks started selling off on the fear of a ‘hard landing’ for the Chinese economy. After all, if your economy is already deflating and facing signs of slowdown, a recession in the economy of a key trade partner is likely not going to bring much positive benefit.

Next up was the United States as US equities got tagged in third week of August and began running lower in a frightening fashion. This all converged on August 24th as we saw risk-off capitulation across markets around-the-world. This is now called ‘China’s Black Monday,’ and this led to a global market sell-off as the combined worries over commodity prices, China’s slowdown, and uncertainty around the Fed were enough to create selling pressure in risk assets that have largely been supported over the past six years.