The Mini Stock Market Crash and Why it Matters
Im not describing toddlers but traders.
This weeks financial market meltdown had a lot in common with a toddler tantrum. The catalyst was Fridays moderately disappointing jobs report, combined with the Federal Reserve Boards failure to cut rates in anticipation of those disappointing numbers. Yes, markets can often signal a faltering economy, but there are better signs elsewhere. A nuanced reading would note that the Fed signaled a willingness to cut rates, that Julys employment numbers may have been distorted by Hurricane Beryl and that the rise in unemployment reflected a spike in temporary layoffs.
But toddlers see best in simple terms. So too do traders, who spat out their pacifiers and revolted, driving stock prices down by 3 percent on Monday. They also drove long-term interest rates down sharply in anticipation of Fed rate cuts. The VIX a measure of how fearful the market is of future market gyrations rose on Monday to worrying levels.
A good tantrum doesnt just annoy parents, it also draws the attention of onlookers. Some drew parallels with the 1987 stock market crash, and others described the Fed as behind the curve. Jealous siblings tend to add fuel to tantrums, and indeed, former President Donald Trump posted on Truth Social that stock markets are crashing and jobs numbers are terrible. The Republican National Committee tried to make #KamalaCrash trend. (Just so you know, even Julys anemic employment growth was higher than the average through the Trump presidency, which was hit by big losses at the start of the pandemic. Also under President Trumps watch, the S&P 500 experienced larger daily declines 21 times.)
https://www.nytimes.com/2024/08/07/opinion/why-financial-markets-are-like-toddlers.html?unlocked_article_code=1.BE4.cJUF.oN1vBco0g49p&smid=nytcore-ios-share&referringSource=articleShare
Think. Again.
(17,324 posts)The stock market goes up and down, and between programmed trading, short selling, daytrading, and retail online trading, it's much more of a computer game than an indication of how American businesses are doing.
BootinUp
(48,897 posts)Think. Again.
(17,324 posts)BootinUp
(48,897 posts)Think. Again.
(17,324 posts)BootinUp
(48,897 posts)Think its worth reading.
orthoclad
(4,728 posts)is a psychopath?
Economics is a religion, at least capitalist economics. It's built on faith. When people lose faith, it crashes, in a faith-and-crash spiral. It's also prone to manipulation by priests rich people,
It has less to do with due diligence and analysis than with emotion.
Would bishops rich people manipulate the market for gain? These little interludes where prices fall are great buying opportunities for those with cash reserves.
Response to orthoclad (Reply #7)
BootinUp This message was self-deleted by its author.