Many economists, financial experts, and pundits chalked up the market retreats on Monday to the July jobs market data that came out on Friday. By Tuesday, they were saying it was an overreaction.

"In our view, the sharp sell-off in risk assets was overdone relative to the current health of the US economy, which is not on the precipice of a recession," wrote Nationwide Chief Economist Kathy Bostjancic on Tuesday in emailed remarks. "Activity in the labor market and the economy overall is moderating as the Fed has held interest rates high; albeit the slowdown is a bit faster than we and likely Fed officials forecast. This raises the likelihood that the Fed reduces the fed funds rate by 75 – 100 bps by year-end to help support a soft landing – previously we looked for 50bps of rate cuts."

That may be true, but many people have ignored a major global financial issue: the carry trade and a Bank of Japan interest rate hike send many investors scrambling to cover positions.