Is it China? Is it Oil Prices? Or maybe the short list of U.S. Presidential candidates is scaring the markets?

Listening to financial and economic experts express bewilderment at world equity market weakness, which has dragged down the price quotation for many well known companies, I have, like them, been puzzling over the matter. With the US economy growing, shopping malls and restaurants crowded and with job growth and the housing sector growing, the sharp sell off in US stocks since the beginning of 2016 appears unjustified. A combination of theories emerges but the one that seems plausible to me is as follows: First world economic growth, and some third world growth is being dragged down by a soaring increase of an elderly population. This in turn is reducing tax revenue for capital development by government.

At the same time, corporations with recent memory of the Great Recession, do not trust in sufficient future growth to justify investment in new plant and equipment. As an extra layer to this scenario, rapidly improving process management in all areas of endeavor are creating efficiencies that delay or obviate the need for many businesses to expand physical capacity and hiring plans that would otherwise be steaming up economic growth. Also, weighing against business expansion are high U.S. corporate tax rates that discourage investment.

Then too, there is significant populist discontent primarily among older voters. Those on the Left feel a further move toward a tax-the-rich government, handing out stipends and welfare to a growing, aging population, see Bernie Sanders as an appealing, impassioned champion. Those on the Right have embraced Donald Trump and Ted Cruz. Wall Street, traditional business Republicans, cannot get behind Trump and Cruz as they are viewed, at this point, as sure losers in the general election, meaning the Presidency will be thrown to whomever the Democrats nominate. Further, jingoistic talk and an inflexible approach to immigration could damage a wide range of industries that depend on young, cheap labor.

Hillary Clinton, while viewed as a practical politician, has a low trust factor and many in her own party cannot warm up to her. That could conceivably throw the nomination to Sanders. If Hillary implodes, something that is possible given questions surrounding her use of government related email communication over a private email account, the race could become Sanders vs. Trump or Sanders vs. Cruz. In other words, extreme left vs. extreme right. Institutional investors and foreign investors are very uncomfortable with such a possibility as it suggests extreme changes in tax policy, appointment of a new, unproven Federal Reserve Chairman, another major foreign war and a host of unknowns.

My theory is that the markets are over-reacting to a perceived disaster at the polls in November.

Below is a videotaped interview with a leading financial commentator that offers similar insights to what is going on…