Stocks went into free fall on Monday, and the Dow plunged almost 1,600 points -- easily the biggest point decline in history during a trading day.
Buyers charged back in and limited the damage, but at the closing bell the Dow was still down 1,175 points, by far its worst closing point decline on record.
Percentage-wise, it was about a 4 percent loss - not as bad as the 1987 crash or the 2008 crash - but the optics of seeing a huge wave of red (losses) dominate the screens has to hurt.
I'm seeing other people online say this is merely a "course correction," that the markets can't ALWAYS go up like they've been doing the last 18 months. But you rarely see a course correction this steep.
I'm also seeing the argument about the crash happening because of inflationary fears and/or concerns about interest rates going up, in responses to the "strength" of the American economy when it comes to employment numbers (which isn't as sound as it looks either).
When you consider a lot of pension plans - city, county, state, private - tie their revenues to stock portfolios and mutual funds, there's a lot of money getting lost for people right now. So this is not good news.
The long-term implications for this are beyond my meager understanding (I got a C in economics: the best I can tell you is "buy low, sell high."), but when I consider Pinku's early warning about the recession, and the fact we've got a federal government led by morons who create economic chaos wherever they go, I am not looking forward to the coming fiscal year.
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Krugman seemed more concerned about whether we had anyone in charge who could deal with a real crisis than this being said crisis. He also pointed out that we're headed into an age of smaller growth because the workforce isn't replacing itself anywhere near fast enough to sustain >3%, and 1.5% was more likely.
Whether "adjusting" to smaller growth will trigger bad market outcomes as it happens remains to be seen, but both asset valuation and real estate were a little high before this latest tumble, so it isn't too far from what could be expected.
Whether either of them turn out to be bubbles bursting also remains to be seen.
-Doug in Oakland
You asked on Twitter "about the latest stock market woes, is there anything worth noting?" Time to check my predictions about stocks: "I expect the Dow Jones Industrials to get above 25,000, struggle to break 26,000, then sink down to between 20,000 and 22,500 over the next couple of years." The Dow broke 25,000 early in January, had no trouble getting above 26,000 but then struggled to stay there, and fell about halfway from 26,000 to 22,500, so my predictions look pretty good so far. At worst, I'm one and one-half out of three and that score will stand no matter what else happens. As for the future, watch what happens with interest rates. Janet Yellen's successor and the rest of the Federal Reserve Board may not raise rates as aggressively as they would have before the worst one-day point drop in the Dow. That may allow stocks to recover to 25,000 before falling below 24,000.
Thank you Pinku-Sensei, voice of reason.
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