Emerging markets followed suit, as have developed markets. Pressure from China could lead to further weakening of emerging-market currencies and capital flight from Beijing to Bangkok to Brazil. In turn, a subsequent strengthening of the dollar and yen could lead to further deflationary consequences in the U.S. and Japan, an unwelcome development, at best.
While the fourth year of a U.S. presidential cycle is typically positive, there are reasons to be cautious, beginning first with the myriad negative developments from outside the States.
China's weakness is chief among them, followed by rising geopolitical risk, a less friendly Fed (until proven otherwise), political risk in a rather uncertain presidential race, and the risk of regulatory and tax law changes that could prove unfavorable to a continued bull market here at home.
But China, in many ways, looms largest. While its consumer economy is growing, China's manufacturing sector had, up until recently, produced a "super cycle" in commodities, the death of which has adversely affected everything from copper to crude oil.