Dive in the Dow

Recently the stock market has seen big fluctuations. Of course, investors are happy when the fluctuation is on the up side, but they worry when the various market indices, such as the Dow Jones Average, plunge. NC State University economist Mike Walden takes a look at what’s driving today’s stock market concerns.

Well, first we have to keep this in perspective. The stock market has actually been on a fairly good run over the last four years. In fact, it has doubled – some of the industries have doubled – since early 2009. So that should be kept in perspective.

“The stock market always fluctuates and what can cause the market to take a big dive is if it’s hit by big surprises and those surprises are interpreted negatively. Now one of the big surprises we’ve had recently has been Ebola. That’s – in many cases, you could say – come out of nowhere. People didn’t expect this kind of concern.

“And, of course, if Ebola were to spread in the world, that could cripple the world economy. So that’s one concern.

“Another concern is that Europe is not growing. Europe is, if you take European Union, the biggest economy in the world. And they are stuck in neutral, when in fact, some of those countries are going in reverse. And we have a lot of trade relations with Europe, so that’s a concern to our companies and our stock market.

“And, lastly the dollar – the dollar has been strengthening. And now many people might think that that’s good. But when you have a stronger dollar, this actually hurts our exports. We’ve been driving a lot of economic growth from exports. So I think that companies are being concerned: Will that start to dry up and will that adversely affect our national economy?”

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