This week’s market rout and growing problems in the subprime lending market have driven shares in Wall Street’s largest investment banks to their biggest losses in a year.
The sell-off has spread from groups more reliant on capital markets trading, such as Goldman Sachs and Lehman Brothers, to those with more retail businesses, such as Morgan Stanley and Merrill Lynch. It has also driven credit default swaps tied to the bonds of several investment banks to just above junk status.
Taken together, the movements suggest many investors fear the recent run of near- perfect capital markets conditions and bumper trading profits have come to an end.Financial Times
To me this is the leading indicator of a slowdown in the economy; if not a bearish market, the economy will not experience bullish markets for sure. When a correction occurred last summer, with major indexes taking massive hits, Wall Street firms still continued rising.