Shaky stock market raises recession fears

Image Source: MGN
Image Source: MGN(KALB)
Published: Aug. 15, 2019 at 6:08 PM CDT
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After a drop of nearly 800 points Wednesday, the Dow Jones industrial average got back almost 100 points Thursday.

The drop of the Dow sparked a fear of a recession. A recession is defined as two consecutive periods, or six month, of a shrink in the gross domestic product.

If this sounds like a foreign language to you, Andy Schlafer, a certified financial planner in the area, is able to translate it.

"It was one of the biggest down days in recent times. It is significant, but it's not unprecedented," he said.

Wednesday's 800 point drop in the Dow caused some panic in investors, leading to an oversell of stocks on Wall Street. This has led to speculation that a recession may be on the horizon. But financial experts say the Dow only represents a fraction of investments

“If someone was going to follow one index, the S&P 500 would probably be the broadest, best represented to follow,” Schlafer said.

A big reason many consumers have their eye on the markets has do to with their retirement investments like 401k plans.

"People have some portion of their retirement tied to owning equities, owning stocks which are represented in the stock market." Schlafer said.

Adding to market insecurity is the ongoing trade wars and the tariffs president trump has imposed on China.

"Long term, if they don't come to a deal, that's not good for either side. The longer those drag on, the more that weighs in the economic concern.We're not concerned over a recession in the near term," he said. "Short term, the market will move on headlines."

Thursday, there was some good news for the economy. The Dow regained some of its losses and reports are out showing stronger than expected retail sales that may set aside some concerns about the strength of the US economy.

Schlafer says Wednesday’s drop and Thursday’s rebound may be an indication of things to come:

“The one thing we anticipate in the future is this continued volatility, larger swings, both ways.”

If you're making any retirement plans, Schlafer says to make sure your portfolio is well diversified. The more solid the investments are, the more apt you are to be able to weather the market swings

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