Oof: Dow falls more than 1,100 points in biggest one-day tumble ever

By —— Bio and Archives--February 5, 2018

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Oof: Dow falls more than 1,100 points in biggest one-day tumble ever
We told you this was going to happen. We also warned you against using the soaring stock market as affirmation of President Trump’s economic policies, because it was a foregone conclusion that this day was coming.

The Dow Jones Industrial Average plunged more than 1,100 points in a volatile session Monday, its largest one-day point decline on record.


The global selloff in stocks rippled through Europe and Asia as well, as a long-running market rally threatened to become a rout. Indexes in all three regions gave up their gains for 2018.

“This is the first time in a while I’d say it feels like borderline panic-type selling,” said Tim Anderson, managing director at brokerage TJM Investments, as yelling broke out on the floor of the New York Stock Exchange. “We haven’t seen something like this since the Brexit vote.”

Monday’s losses were broad-based, with all 11 sectors in the S&P 500 posting declines, led by losses in the energy, financials and health-care segments.

At 4 p.m. ET, the Dow had fallen 1,175 points, or 4.6%, to 24346. The S&P 500 lost 4.1%, and the Nasdaq Composite fell 3.8%—with both indexes registering their first three-day declines since December. At its lowest point Monday, the Dow fell 1,597 points.

The stock market has stumbled after a strong start to 2018 as investors have expressed concern that a long streak of tepid inflation and low interest rates could be drawing to a close.


You’re going to get some crowing from Democrats about how all this proves Trump policies are a disaster, and that will be just as idiotic and those who thought the soaring stock market of a few days ago proved the opposite.

This is what markets do. They grow, overheat, self-correct, overreact to certain things and miss the significance of others. Markets represent the inclinations of buyers and sellers at a point in time, and their assessment on that day of the risks and rewards that might be associated with certain investments. They’re often based on real factors that matter, but they also tend to get jittery about things that are only scarcely even related to what might happen with a stock or group of stocks.

This particular crash seems to be motivated in large part by the expectation that the Federal Reserve is about to raise interest rates. And yes, of course they are. Interest rates are still artificially low, which is hampering the value of savings even as it papers over the true cost of borrowing. People like easy access to capital, but if the lenders can’t make any money off the loans then you’ve got a situation that can’t sustain itself over the long term.

And ironically, the widespread expectation of stronger economic growth contributed to the sell-off as well, since growth at least in the short term could also mean higher borrowing costs.

Real growth in the markets is usually incremental, and with this dive the market is now up 0.7 percent compared with the start of the year. That’s a very respectable showing. It’s just not the spectacular world-beating showing it appeared we were getting a few days ago. That was always illusory. Such things generally are.

So please, don’t jump out of any windows - and if I were you I’d hang onto your stocks. They’ll bounce back. They always do.

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Dan Calabrese -- Bio and Archives | Comments

Dan Calabrese’s column is distributed by HermanCain.com, which can be found at HermanCain

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