Stock market: Wall Street’s wild ride
President Trump “is learning a basic and painful lesson of Wall Street: Stocks also go down,” said Ben White in Politico.com. After months of relentlessly citing the market’s meteoric rise as proof of his economic prowess, the president was uncharacteristically quiet this week as a “swift and historic fall” rattled Wall Street. The Dow Jones industrial average plummeted 1,175 points on Monday, its largest-ever single-day point drop, as the major global indexes erased their gains for the year. Unusually volatile trading continued throughout the week, with a 567-point one-day gain. Monday’s precipitous plunge abruptly ended “a remarkable period” on Wall Street in which it seemed “the only direction was up,” with investors and most analysts confident that the U.S. and other big economies are “on stronger ground than they have been in years.” Even cynics had begun acting as if the record gains were “bulletproof,” said Jeff Cox in CNBC.com. But in a dizzying few days of trading, the market “took on a mind of its own.”
“Wall Street was overdue for a reality check,” said Heather Long in The Washington Post. Between January 2017 and January 2018, the Dow went up 26 percent; the historical annual average is 8 percent. It seems only right that “investors were beginning to question whether stocks really should be at such high levels.” It’s also important to remember that “the stock market is not the economy”—which is “doing very well right now,” with low unemployment and solid growth. If anything, it might have been good news that sent the market into a tailspin, said Catherine Rampell, also in the Post. Last week’s jobs report, which showed the economy added 200,000 jobs in January, indicated wages grew by 2.9 percent, the “fastest annual pace since June 2009.” That should be cause for celebration, but it could also signal “the start of higher prices—that is, faster inflation.” Investors are worried that the recent corporate tax cut might actually work too well and overheat the economy, leading the Federal Reserve’s new chairman, Jerome Powell, to hike interest rates more quickly than planned to keep a lid on inflation. Another factor spooking traders: an uptick in the federal government’s projected borrowing—nearly $1 trillion this year, 84 percent more than in 2017, as tax receipts fall thanks to the tax cuts. That could also drive up interest rates, making it harder for businesses and consumers to borrow.
“Stop trying to make sense of the stock market,” said Jason Zweig in The Wall Street Journal. “People don’t always act rationally in response to new information; often, they react to nothing but how they think other people will act.” Occasional madness is part of the package, and a “reminder that investing in stocks doesn’t automatically make people rich.” It’s a message Trump might want to heed, said Peter Baker and Binyamin Appelbaum in The New York Times. “No president in modern times has connected his political fortunes to the stock market as much as Trump.” This week’s dive was a vivid demonstration of why past Oval Office occupants have “scrupulously avoided” taking credit for market rises. “If you live by the Dow, you may die by the Dow.”