The Dow Jones Industrial Average did a free-fall of nearly 12-hundred points on Monday, down 4.6%, its worst drop ever. Creighton University Economist Ernie Goss says there is probably more to come.
Goss says, “The Volatility Index has doubled over the last few weeks so this is not a time for those faint of heart. This is all about interest rates and all about inflation and it is global, not just in the U.S. We are seeing it across the globe right now.”
When it comes to interest rates, Goss says short term rates are already scheduled to go up about three-quarters of a percent. He believes it will be higher, ranging from 1 1/2% on the short end to another 1% increase in long term rates. According to Goss, we also need to see inflation calm down. He says have gone to a world concerned about deflation to one now that is concerned about inflation all in a matter of months.
So, how should investors react? Goss says, “This is no time to panic. It depends on your outlook. If you are looking at six to ten months or a year, maybe you need to move into cash. If you are long-term, 3, 4, 5 to 10 years, don’t panic. We are going to see a return to good fundamentals.”
Goss says another player will be the release of the Consumer Price Index by the Bureau of Labor Statistics. That will happen next Wednesday.