“Scientia potentia est”… “Knowledge is power.”
-Attributed to Francis Bacon

Over the past few days, I’ve read at least 10,000 words of analysis from various market “experts” attempting to explain the market sell-off.

But when you boil down what’s going on to its most basic elements, you really only need to know two words to understand this correction.

At first, these two words may seem disconnected. However, today I’ll show you how they’re two sides of the same financial coin – and they put what’s happening with the economy and the markets into perspective.

Understanding the market’s plunge may sound little more than academic at this point. Who cares why something happened? What you want to know is what to do now.

Well, you can’t go on the offensive – you can’t make the right moves – without first understanding the sell-off.

So, let’s get cracking…

Knowledge Is Power Word No. 1

Wall Street seems to have come unhinged this month. And it all comes down to our first word –uncertainty.

Uncertainty is the one thing that institutional investors hate above all else.

This explains why so many pros have been selling aggressively over the last two weeks. It’s also the key reason why stocks go down much faster than they go up.

When Wall Street is uncertain about how key factors will play out, it’s quickly becomes a scenario of dump stocks first and figure it all out later.

Let’s start with the price of oil. When it dropped below $30 a barrel last week, we saw a wave of selling on heavy volume.

That $30 price tag seems to be a key psychological threshold for traders. The worry here is that if prices fall much further, it could destabilize not just the U.S. energy industry but spread deflation through emerging economies that rely on sales of commodities to raise currency.