Stock market volatility this month may be harbinger to economic - FOX34 Lubbock

Stock market volatility this month may be harbinger to economic decline

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Photo of a NYSE trader after stocks fluctuated Monday, August 24th. Photo of a NYSE trader after stocks fluctuated Monday, August 24th.
LUBBOCK, Texas -

After calm, steady gains in the stock market this summer, Wall Street volatility is back this month, as the DOW and S&P 500 dropped to the point of near-correction Wednesday.

Mark Bass, a financial planner, said the sharp back and forth of Wall Street this month is a sign of the stock market coming back down to earth.

"Part of it is that I think folks have very short financial memories, so we've had less than normal volatility the last two years. So the volatility of 2018 is a bit more normal. I mean, you can think about how we had a peak in January and then dropped ten percent, then it came back up and dropped ten percent. This was earlier in the year. The same thing happened in 2015," Bass said.

He said this volatility is likely to continue in the short term, due to likely interest rate hikes from the Federal Reserve and the trade war with China. 

"Keep this in mind, most people are really emotional about their money, and so a lot of the volatility we've seen in the stock market, we would attribute it to that emotional response, which affects the stock market in the short term," Bass said.

The upcoming midterm elections are also contributing to this uncertainty, and Bass added the market will rise once its over. 

"This is pretty typical of a midterm election year, and then afterwards, historically, you might even see it go up because the uncertainty goes away," Bass said.

Bass said he believes this uptick will happen after the election, but long term, the recent drops in the stock market may signal a drop in the economy as well.

"I think we're still basically in good economic footing as a country, which is a harbinger for the stock market, but the stock market tends to be six month in advance predictor of the economy. So once the stock market might decline, let's say six months from now, I bet we'd have an economy decline six months after that," Bass said.

Technology companies may have suffered the most from Wednesday's drop, as shares in Amazon, Microsoft, and Facebook all fell more than five percent. 

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