Last month started out rough. You could almost hear a slide whistle as the Dow tanked around the first of February. Investors’ confidence seemed shaken. Immediately, Democrats who wouldn’t give Trump credit for a strong 2017 saddled him with the blame for a market in freefall.
Then the markets jumped back up — everyone went silent. Then they dropped again, and the jeers ramped back up. This kind of yo-yo market is enough to give someone a heart attack, or indigestion at the least.
To tell a family tale, I watched in horror as my chip stocks and consumer staples plummeted. I don’t feel good about their immediate future. However, in the long term, I’m confident. I sincerely believe the future for our economy is healthy.
It sounds strange to write, but part of what caused this shake-up was the strength of a Trump-oriented economy. Economists across the board have said one of the reasons behind the market pullback is the economy grew too fast. (First it’s too slow, and then it’s too fast. What makes these guys happy?)
Before you cash in all of your retirement assets and remove your nest egg from the market place, take a deep breath. I know we forgot because of the last year — but markets go down as well. Nothing can soar upward forever. (Just ask Icarus.)
Don’t look at this as the first crash of a recession — if anything, it’s a correction. The Trump economy is forging straight ahead. I predict when 2018 is over this will have been an aberration.
There is lots of speculation on what caused the largest drops in two years for the stock market. One of the drops came as new a Federal Reserve chairman, Jerome Powell, took the helm of the central bank.
Did the markets fear his approach to interest rates?
Then there’s the strong economy. Just before the markets dropped, all the economic indicators showed growth in jobs, wages, and profits. Some say the economy was getting “too hot.” If you look at the last year’s growth on a chart — it was a steep climb. One like we haven’t seen before.
There’s also the huge spending package that went through Congress. The amount of debt the federal government may assume is rising, again.
Each of the factors I mentioned played into the see-sawing market in their own way.
If you’re wondering how wage growth could drive a market down, trust me, it can. Several reports showed wage growth stagnant for years and then shooting up — created a fear that the Federal Reserve will raise interest rates. (They did raise rates.) Then the government showed signs of increasing the national debt. See how this gets out of hand?
Suffice it to say, all of these played into the market drops in some way. Investor confidence had reached amazing highs. Immediately the fear turned to, “where is the bottom?”
So how is this good?
The correction on a stand-alone basis isn’t good. We are talking billions of dollars lost in a week. That’s nothing to cheer about.
However, the overall strength of the economy continues. We will have a better idea of where values are for stocks after a year of continuous growth.
Don’t believe me? Look at the indicators.
Those same factors that drove a drop also show a healthy economy. Take for instance the wage growth. Whether it was a media ploy or favor to Republicans, employers raised wages across the board for millions of workers.
It’s important to remember that for years interest rates and wage growth have been the same, stagnant. With salaries rising, interest rates must come up to protect us from inflation. That is enough to scare the market place.
Even the banks don’t seem to be concerned. Bank of America acknowledged the losses to the stock market, but predicts the outcome won’t affect the economy.
This is a correction. Unless the drop continues and takes the economic indicators with it, this will be a blip on the radar of a robust economy.
Despite his lack of social media and public etiquette, Donald Trump has delivered a new strong economy. It’s a little uncertain for investors. But, the overall view of it is healthy, not stagnant. This correction was an answer to: What is the value of certain stocks?
If the last few months are any indicator of the future, the stock market could have another healthy run. Just not one with the incline 2017 had.
Article last modified on December 21, 2018. Published by Debt.com, LLC . Mobile users may also access the AMP Version: Don’t Buy the Panic on Wall Street: Trumpenomics Built to Last - AMP.
Article last modified on December 21, 2018. Published by Debt.com, LLC .