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Economic fears push down stocks, bonds

by Lynde Langdon
Posted 8/15/19, 11:41 am

The U.S. stock market had its worst day of the year Wednesday, with the Dow Jones Industrial average dropping a whopping 800 points. The yield on Treasury bonds also fell, signaling that investors are buying up bonds because they think stocks will continue to decrease in value.

Does this mean a recession is coming? The bond market shifted the same way this week as it did in 2007 before the Great Recession—and the four recessions before that. Worry that the U.S.-China trade war will drive up consumer prices is fueling fears of an economic downturn. The U.S. retail market is so far staying strong. Overall retail sales and Walmart’s profitability both did better than expected last month. But uncertainty over China is still shaking investor confidence.


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Lynde Langdon

Lynde is a WORLD Digital’s managing editor and reports on popular and fine arts. She lives in Wichita, Kan., with her husband and two daughters. Follow Lynde on Twitter @lmlangdon.

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Comments

  • news2me
    Posted: Thu, 08/15/2019 08:09 pm

    The powers that be are still controlling the stock market.

    I guess they need to make people believe it's TRUMP'S FAULT.

  • OldMike
    Posted: Fri, 08/16/2019 07:48 pm

    Now, here’s an OldMike educational feature:  [smiley face]

    When you read news items about the stock market “plunging” or “shooting up,” perhaps you envision something like the Crash of 1929, or conversely, millions of ordinary people suddenly becoming millionaires from their 401k’s. 

    Perspective is important. The “Dow” today is a bit under 26,000 points. Earlier this week it dropped about 800 points. That’s about 3%.  By now it has partially  regained some of that loss, so overall for the week, the Dow is down about 1.5%. (What is the “Dow?”  Motley Fool website has explanations of that and other financial terms.)

    The stock market does that all the time, goes up a bit and down a bit, but the overall trend is up.  800 points is rather unusual, but for perspective, at the end of 2010, the Dow was at about 10,700.  So if you held a certain group of stocks in 2010,  like your 401k or IRA, and had not invested another cent, nor sold off anything, today your investment would be over twice as valuable.  

    On the other hand, that group of stocks was worth less in 2010 than it was before the “correction” in 2008 (which some people considered a crash). In late 2007 the Dow peaked at a bit over 14,000, but by March 2009 it was about 6600!  

    Devastating?  It depends.  I decided to just ride the whole thing out, and actually increased my percentage of wages being deducted for my 401k when the Dow was way low.  I’m much better off now than a friend who got tenser and tenser as the market dropped, then finally cashed out everything he had invested when the Dow was near the bottom.  

    On the other hand, really smart folks sold off a lot of what they had when the Dow had begun to drop, bought up everything they could when the Dow was at the bottom, and held it to now.  It’s the extremely rare and lucky investor who times the market that well.  

    So.  The lesson is, no matter what the media says about the markets “plunging,” overall the trend is up, up, up.  And the safest strategy—for those of us who do not have uber investment savvy or incredible luck— is just hang on, don’t panic, don’t make frantic calls to your broker because you heard something on the 6:00 news  

    And keep in mind, right now there are plenty of people interested in having you believe everything is going to ruin, and it’s all President Trump’s fault!

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