Oil prices plunged, junk bonds hit a 2½ year low, stocks took a nearly 4% hit, a junk bond fund halted withdrawals, the country’s biggest pipeline operator cut its dividend by 75% and two of the biggest mining companies in the world suspended theirs completely. It was not a good week for financial markets. And the Fed meets to hike interest rates next week for the first time since the 2008 crisis. After hinting so hard for so long, it is hard to see how the Fed could not follow through on their threats but the markets and economy aren’t making it easy. I said at the beginning of the year the Fed would not hike in 2015. With one meeting to go, I’d say my odds are still about 50/50.

I’ve been warning about junk bond credit spreads for over a year now. We watch them closely because they have, in the past, been a great indicator for stocks. Spreads first started widening in the summer of 2014 and that led to a stock market correction in October of that year. Spreads narrowed for a while after the first of the year and then resumed their widening in June of this year. We lowered our allocation to stocks in early August for exactly that reason. Now spreads have moved to their widest since the pre-Mario Draghi, whatever it takes, Euro crisis of 2011.

The trigger for last Friday’s big selloff in junk was the shutdown of a Third Avenue credit mutual fund. The fund had suffered big losses this year – over 25% – and was getting redemptions faster than a coupon for free Ben & Jerry’s. Rather than accept fire sale prices in a thin market, the firm decided to pay out what they could in cash and liquidate the rest over time. We see this kind of thing in hedge funds more often but seeing it in a retail open end mutual fund is a bit jarring. However, this was not just a run of the mill junk bond fund. Actually, it is – was – more of a distressed debt fund, not exactly the most liquid of assets in the best of times.