What’s the Story on the Stock Market?

By No Labels
February 6, 2018 | Blog

Amid all the talk about budgets, taxes and the economy in Washington, the roaring stock market has been a consistent backdrop in recent months. Politicians, including the president, have cited it many times.

So what happens when the market nose dives, as it has over the last few days? Rounds of analysis, finger-pointing and second-guessing, of course. Amid all this—and the noise is likely to continue—here’s what you need to know.

There was no precipitating event

Sometimes, large events—like war, elections or terrorist attacks—move markets. But, as Bloomberg reported, this sell-off, “Lacked a specific trigger … experts are pointing to a confluence of factors.” As of Monday, the decline was not even technically a market correction, according to The New York Times. A correction is a drop of 10 percent or more. This slide was 8.5 percent. “In truth, it’s as if we had turned back the clock to where the stock market was in the middle of December, when investors—and, yes, the president—were proudly cheering its success,” the paper reported.

Many parts of the economy are still strong

Many news outlets say there is much to be optimistic about, even as stock markets decline. “The rush of anxiety has obscured a fundamental fact about the U.S. economy: It’s healthy,” the Associated Press reported, adding that “The job market is strong. So is housing. Consumer confidence is solid, and manufacturing is rebounding. Households and businesses are spending freely. Personal debt has lightened since the financial crisis a decade ago. And major economies around the world are growing in tandem.”

Polling in January showed confidence

Polling shows that many Americans feel good about the economy, or at least they did before the stock market declines. A Harvard/Harris Poll in January showed economic optimism was at its highest levels ever during the Trump administration, with 51 percent saying the economy is on the right track. Two thirds (68 percent) said they believe the U.S. economy is strong. One third (31 percent) said their personal financial situation is improving and another third (36 percent) said they are as well off as they have been. Only about a quarter (24 percent) said their situation is getting worse.

The president may feel some fallout

Still, the president often touted the rise in the markets—he took credit at least 25 times in January—and he may get some blame for their decline. Whether this has any lasting effect on President Trump remains to be seen, but it is exactly why most presidents avoid any association with markets that fluctuate daily. As The New York Times put it, “If you live by the Dow, you may die by the Dow.”

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