Trying to make sense of the Dow’s two-week slide? So are economic and financial experts in metro Atlanta and beyond. Here’s a survey of what a few of them — optimists, pessimists and in between — say about how we got here, what lies ahead and how to react.
PRIMARY CAUSE OF MONDAY'S NOSEDIVE
“The economy was much weaker than people were expecting at home, and also the emerging markets in southern Europe are slowing, which people were not expecting. Then we had this crazy debt ceiling political dysfunction, and when you put it together the markets wake up all of a sudden. That’s when they start doing corrections.” — Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University.
“I believe the central theme is the slowdown of the U.S. economy. By slowing down the world’s largest economy, you are basically impacting every other country.” — Nick Bhandari, executive vice president and partner with HA&W Wealth Management in Atlanta.
“The driver of it is the developments in Spain and Italy. So the European Central Bank is talking about taking a page out of [Ben Bernanke’s] playbook and finally buying Italian and Spanish bonds. If they did that in a big way, the fear of the EU falling apart would be greatly abated and markets would recover.” — Eileen Appelbaum, senior economist at the Center for Economic and Policy Research in Washington.
“We’re still in the depression we were in 2008; we never came out. We hid it. The government chose to hide the deflationary period we were in. What we’ve got here is an engineered collapse, because the limits of the policies we put in place three years ago are being found.” — Karl Denninger, financial analyst, blogger of Market-Ticker.org, and author of the upcoming book “Leverage: How Cheap Money Will Destroy the World.”
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SHORT-TERM OUTLOOK
“The probability has gone up a lot in the last 10 days of a double-dip [recession]. On Sunday I had the odds at 25 percent, but depending on what happens this week, I can up that number.” — Dhawan
“I would not be surprised to see a small bounce-back this week. A sustained [recovery] is hard to say. I think the rest of this quarter, at least into October, I’d expect it to be a fairly yin-yang market [for a while].” — Bhandari
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MID- TO LONG-TERM OUTLOOK
“The worst-case scenario is bank failures in Europe creating crisis worldwide. [I don’t] think that will happen ... but I don’t think my house will burn down, either.” — Rex Macey, chief investment officer with Wilmington Trust in Atlanta.
“We are headed for a cataclysmic collapse, and we are starting to see the start of it right now. I think the Dow could be 2,000 to 3,000 before this thing bottoms and the S&P at 400. At the rate it’s happening now, a few weeks.” — Denninger
“If you look at stock prices you’d think we must not be recovering, but that’s not the case. ... All that has really happened is we’ve given back gains for this year.” — Bhandari
“What we are talking about is a very slow-growth world and that is not the end of the world. I’m not optimistic about the market in the next five weeks. But five years? Yes.” — Macey
“If you’ve got five years, the market will be back.” — Appelbaum
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WHAT YOU CAN DO
“If you are [planning to stay in the market for] five years or longer, I don’t think you want to factor in the last two weeks to make big decisions, just very tempered decisions. Because it is very easy to act on emotion. When people act on emotion, we usually make the wrong decision.” — Bhandar
“Time horizon should dictate the form of investment. Short-term investments shouldn’t be in equities, and long-term should be able to ride out the short-term gyrations.” — Macey
Compiled by Katie Leslie, kleslie@ajc.com
