We’ve seen the stock market fluctuating the last couple of weeks – from the highest of highs, to record lows. Monday experienced the steepest drop in six and a half years, and Tuesday morning, major indexes in Europe tumbled.
Professor Chris Hughen, an expert in finance at the University of Denver’s Daniel’s College of Business, says recently we’ve seen runs in the stock market, and I the last couple of days, we’ve seen a massive slide.
“Basically, for 2018, we’re about flat in terms of stock market performance, what’s really going on, is the world economy is starting to catch fire.”
Hughen says The U.S. economy has been doing very well, and so have European markets and growing markets. All of this is creating a demand for money, and it pushes up interest rates, and pushes up prices. Hughen says for young people, this doesn't mean much, since young people should be saving on a regular basis and be focusing on long term returns. He says to not panic, and be patient and wait out the bumps in the road so to speak.
“We’re probably going to see more volatility in the market place, and there are a couple reasons for that. First interest rates are rising around the world, and basically interest rates are negative for stock prices, the other thing we have to watch out for – is the Federal Reserve is basically unwinding the federal monetary stimulus. This is also going on in Europe as well, so as they remove this stimulus we’ve seen for the last ten years, we’re going to see a little more volatility.”
As for who’s to blame for the recent fluctuations in the economy, Hughen says it’s much bigger than the person in the White House or which political party is in control right now. He says we may realize that later, but in the short term, it’s more complicated.
“The U.S. market is very much like a barge in some sense, the economy is very hard to move, especially over a short period of time, so I’m reluctant to give the President, regardless of the party, too much credit in terms of what is actually going on in the economy, they’ll have an effect in the long run, but not in the short run.”
Hughen says the best thing to do is focus on what you can control, and that includes saving money for things like a house, your retirement, or your child’s education.