Twice this week the Down Jones Industrial Average dropped more than one-thousand points. Investors are nervous. Omaha Financial Advisor Darrell Bryant says everything is not all gloom and doom. He says, “We still have some reasonable fundamentals in the market. Some people are saying to buy on the dip. Some people are saying let’s wait until we see some certain economic data points stabilize but no one has a crystal ball.”
Bryant two issues will be impacted by the market swing – interest rates and inflation. They are closely tied so time will tell how this will impact individuals and businesses. There are several fears. He says, “What we are afraid of is an inflationary trend. We have increased wages. We had the best wage growth recently since 2009 I believe. And then tax cuts for the corporations so bonuses are going out and all these types of things. What that means is more money rolling around and if there is more money rolling around out there it can be put places and demand for goods and services go up.”
There is a flip side to that. Bryant explains that when that happens demand goes up and so do prices. That is when the fed gets scared because they want to curb inflation so there is discussion on interest rate increase. The Stock Market doesn’t like that because small business cost of borrowing goes up because interest rates go up and profitability goes down. This is what can trigger a panic situation.