Good morning. The risk-off mood is growing after yesterday’s big drops on the Dow and S&P. The bad news: analysts think there’s still further room to fall—particularly with tech stocks.

Let’s spin the globe and take a look at what’s driving markets.

Markets update

Asia

• The major Asia indexes are mostly lower in afternoon trading, with Japan’s Nikkei the best of the bunch, up 0.2%.
• The TikTok saga gets more incoherent by the day. The latest: President Trump said yesterday he’s having second thoughts about the Oracle ByteDance tie-up, and may rescind his tentative blessing. As any TikTok fan will tell you, the best skits are usually blessedly short and involve a lot of engaging characters. This one is anything but that.
• India is beginning to diverge from neighboring economies as the coronavirus situation worsens there. Cases topped 5.4 million yesterday.

Europe

• The European bourses are the outlier this morning. They were up, led by Europe Stoxx 600, at the open after massive drops on Monday.
• The British pound fell precipitously this morning as the U.K. government told the public to work from home if possible. That’s a full reversal from its position last month when it was trying to encourage workers to go back to the office to jumpstart the moribund economy.
• ECB president Christine Lagarde told the markets the central bank could throw more stimulus at the crisis this autumn to keep the eurozone on the road to recovery.

U.S.

• U.S. futures point to another weak open. That’s after the Dow fell 1.8% yesterday following comments from Fed Chair Jerome Powell that the U.S. economic recovery will be anything but speedy. (He speaks three times before Congress this week).
• Another cloud hanging over the markets is the lack of a new stimulus deal. A likely Supreme Court fight would all but kill off that possibility.
• Following yesterday’s plunge, analysts are now recalibrating their forecasts. There are now calls that the S&P 500 could drop a few more percent, to below 3,200 and even test 3,100.
• Worse, the Nasdaq 100 could go full correction, and fall 20% from its early September high, says Morgan Stanley. It’s already off 13% since Sept. 2.

Elsewhere

• Gold is down, trading around $1,900/ounce.
• The dollar is up again as equities falter.
• Crude is flat, with Brent trading around $41.50/barrel.

***

On dogs, investing and Europe

When I’m out walking the dog, I try not to think about the markets. But I often do.

I’m not alone, apparently.

André Kostolany, the 20th Century stock market whiz, had a great metaphor for the markets that dog owners might appreciate. As I wrote in this month’s issue of Fortune:

The Hungarian-born economist and stock picker famously observed that the relationship between the stock market and the economy is akin to a dog out for a walk with its owner. 

The master, holding the leash, and usually behind the dog, is like the economy, he explained. The dog, darting ahead, is the stock market. Kostolany’s point: We should give the stock market credit for anticipating the future. 

Take last month’s stock market rally. (Yes, that rally was only a month ago, in August). Even as U.S. equities were soaring then, something more important was happening that got far less attention: investors were pulling their money out of U.S. stocks, and not just because Big Tech valuations were overheating. (More on that below).

Where were they putting their cash? Increasingly, into European equities. Note: that’s continental European equities; investors have long soured on U.K. stocks. (Wouldn’t touch them with a barge pole, I can almost hear my British friends saying).

Using Goldman Sachs data, I put together this chart. You can see the volatile fund flows on one side of the Atlantic.

In five of the past seven weeks, investors have pulled money out of U.S. equities as the red line shows. Over the same period, investors steadily bought up European equities, as the blue line shows.

In the past week, there was a big swing back into U.S. equities, but it’s too early to say if that’s the start of a trend reversal or just further sign of volatility in this asset class. In any event, before the most recent week, investors had cumulatively pulled a combined $17.7 billion out of U.S. stocks and put over $1.5 billion into European stocks.

The trend that’s been emerging is one where European stocks are looking more attractive to investors.

I spoke to Holger Schmieding, chief economist at Berenberg Bank, about why that may be. He laid out a compelling long-view argument that basically says: good ol’ Kostolany was right. The markets are telling us something we may have missed about the European economy—that investors see it as a compelling growth play.

Here’s the full argument. Let me know if you buy it.

***

Have a nice day, everyone. I’ll see you here tomorrow. 

Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com

As always, you can write to bullsheet@fortune.com or reply to this email with suggestions and feedback.

Today's reads

Pandemic survival: hedge fund edition. Since May, Bridgewater Associates has taken the unusual route of setting up a trading floor war room in a pine forest not far from company HQ in Westport, Conn. Fortune's Jen Wieczner heads into the woods with them to learn about some of the unique challenges the team faces, and just how long they'll stay out there.

Gold rush. The price of the shiny yellow metal has been in the doldrums for a good portion of the past month, dipping below $1,900 at one point yesterday, before recovering. But zoom out over the past five years, and gold has been delivering killer returns. Demand for gold-backed exchange-traded funds is but one reason for that. Gold ETFs have been soaring even as mining capacity has fallen like a rock. Fortune's crack graphics team breaks out the dynamics behind one of the great bull runs of 2020.

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