The Flinchum File
Thoughtful Economic Analysis and Existential Opinions

The End Is Near? Nope!

10/11/2018

The stock market held a SALE today, with the Dow stocks getting over 800 points cheaper.  No, it is not the beginning of the end.  More likely, it is a normal bull market correction.  Here is what happened:

The European markets closed down sharply.  They were understandably frightened of rising interest rates.  The impact of rising U.S. interest rates on foreign borrowers of dollars should not be taken lightly.  Then, someone noticed the Chinese are devaluing their currency more than expected, possibly provoking a Trump over-reaction that might be stronger than reasonable.  Then, someone noticed the Hurricane Michael barreling into Florida, causing an estimated $100 billion in costs for insurance companies.  Then, there was a rumor the costs would reach $1 TRILLION.  (Not bad, for a baseless rumor, is it?)

Nobody was reminding the sellers that the economic data is good as far as the economic eye can see.  That’s why today’s loss is not THE END.  There is still no evidence of a pending financial crisis.  That’s why today smells more like a typical bull market correction.

Quick — go buy something . . . before the SALE is over!

 

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