Contagion, finally

It was only a little more than a month ago that the S&P 500 stock market index hit an all time record. It looked like shares were exempt from credit problems. But that isolation has ended. The US index has subsequently fallen by about 10%. When liquidity almost disappeared from the money markets in August, stocks suffered. But they then recovered, along with credit markets. The Itraxx index of European investment grade credit spreads, which had risen from 20 to 57 basis points in August, fell a...