We know watching the Dow drop 5.69 per cent, the Nasdaq fall 4.77% and the S&P 500 plummet 6.10% is unsettling. Didn’t everyone just get done telling us that the government had rescued the economy? Wasn’t the Wall Street bailout supposed to help “mainstreet” avoid economic calamity?
But if we crunch up our eyes enough we can see some good news in today’s equities markets. In the first place, the downturn in the major US indexes followed the down drafts in Asia and Europe. That seems like a rational and even predictable movement, rather than the erratic leaps and dives we’ve seen in recent weeks.
Moreover, we’ve had a lot of tough news and warnings from corporate America on earnings. Trading down on profit warnings is a pretty rational and even normal response to economic news. The reason that’s good news is that it means we’re not experiencing mysterious problems in credit markets or some new financial innovation no one ever heard of exploding all over the markets.
Downward corporate profit guidance pushing the stock market down is like waking up with a hangover rather than a mysterious rash. At least we understand this.
The bad news is that the markets have been so grim for so long that we’re happy about this.