Advertisement

The Stock Market Waves Goodbye to Easy Money

The Stock Market Waves Goodbye to Easy Money
From TIME - February 8, 2018

The most important job of the chairman of the Federal Reserve is largely an intangible one: to instill confidence in money, markets and the economy. But as soon as Jerome Powell was sworn in on Feb. 5indeed, before he was sworn inconfidence collapsed and took the stock market with it. The Dow Jones average plummeted 666 points on Feb. 2 and 1,175 points on Feb. 5the largest point drop in its historybefore stabilizing Feb. 6.

Practical-minded businesspeople may be tempted to dismiss these wild market gyrations the same way they dismiss Trumps tweetsmere noise that obscures the music. After all, the fundamentals of the economy are good, earnings are strong, inflation and interest rates are low, so why worry?

But theres probably a signal in there somewhere. Yes, algorithmic trading of volatility-related derivatives had a lot to do with the markets roller-coaster ride. But so did legitimate uncertainty about the future.

Advertisement

Continue reading at TIME »