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Stock market slide leaves investors cautious
It wasn’t a good day for many people’s 401Ks, as a major stock market slide accelerated Monday with the Dow Jones marking its worst day in almost two years.
MINNEAPOLIS (FOX 9) - A major stock market slide accelerated Monday with the Dow Jones marking its worst day in almost two years.
It’s not a good day to look at your 401K, but is it a sign of bad long-term economic developments?
Local economists tell us the message is simple: Don’t panic.
We’ve been on a rough two-day roller coaster ride, but markets are still up for the year and most signs point to the economy still being strong.
"So there does seem to be a disproportionate response in stock markets over the last couple of days," said Dr. Tyler Schipper, an associate professor of economics at the University of St. Thomas.
Schipper wasn’t pulling his money from the stock market on Monday.
The dive started Friday after unemployment numbers showed a half percent rise year-over-year – from 3.6% to 4.1%.
Schiller says that often signals a recession incoming, but the economy emerged from the pandemic looking different and most signs are still solid.
"The overall job market is looking pretty strong," Dr. Schipper said. "It's been on a slowdown, but it hasn't been in a crisis situation kind of like we've seen in the stock market the last couple of days."
Labor markets are still creating more jobs per month than they were in 2019, and the number of job openings per worker is still about the same as it was in 2019.
And Dr. Art Rolnick says the slide is likely just a Wall Street blip.
"Even this particular drop, it looks large on a day-to-day basis, but in the big picture it just wiggles," Dr. Rolnick said. "The stock market behaves this way."
The University of Minnesota economics professor and former director of research at the Federal Reserve Bank of Minneapolis points out stocks are still up for the year, although they lost more than half their gains on Monday alone.
But he says people predicting a crashing economy haven’t looked good lately.
"They were nervous about a recession two years ago when we didn't have this decline," Dr. Rolnick said. "They were worried about a recession last year. So I think it's a guessing game at best."
Schipper says there may be calls for the Fed to give an emergency interest rate cut to boost the economy, but that type of panic move could make this slide seem more real than just a mirage.