The first sentence of my market update for last January went like this: “U.S. stock markets dropped across the board in January, as investors reassessed their risk tolerances.” Sound familiar? I went on to note that the primary concerns were slow earnings growth, caused by weakness elsewhere in the world, and a strong dollar. Again, does that ring a bell?

Overall, last week’s data reflects an ongoing split in the U.S. economy, with consumers and the service sector doing well while manufacturing and industry continue to struggle. 

As expected, this morning’s GDP report wasn't cause for celebration. The initial estimate of economic growth in the fourth quarter of last year came in at 0.69 percent on an annualized basis—well below the previous quarter’s figure of 1.98 percent and even further below the fourth quarter of 2014, which posted growth of 2.07 percent.

As we discussed yesterday, a number of countries depend on oil money to keep their populations happy, and lower oil prices are threatening those governments’ legitimacy. They lost control over the pricing mechanism as free markets took over, spurred by new technology—in this case, fracking.

Following up on yesterday’s post, let’s take a look at what the oil price crash might mean for states in general. The problems in the Middle East and Africa are the most glaring, so we'll start there.

Overall, the effects of low oil prices here in the U.S. have been positive—very positive, in fact. In the rest of the world, this is even more true. China and Europe, for example, import much more energy as a proportion of their economies than we do, and the positive effects have been proportionately greater. Whatever troubles China and Europe are having, they would be much, much worse with higher oil prices.

There are, however, real costs of cheap oil.

This past week had a light data calendar, with prices and housing coming into focus. Let’s take a closer look.

One of the assumptions I’ve made in my recent analyses of the markets is that we are not in—or close to—a recession. Although I stand by this view, it’s common sense that, at some point, the U.S. will see another recession. When that happens, stocks are very likely to pull back, and we might enter the bear market everyone fears.

Yesterday was a wild ride. The market dropped steeply at the open, plunged even more at midday, and then came back strong, leaving us down just a little.

I was getting on a plane as it was dropping the most, and I have to admit it was an anxious flight. The market was the first thing I checked when we landed, and I was relieved to see the recovery.

Oil prices continue to fall and are bringing markets down with them. We talked about why oil prices are dropping last week, so today, let’s take a look at why markets are getting hammered—and whether that is likely to last.