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February 27, 2007
Asian markets down again
Wednesday's trading day has begun in Asia, and it's not good.
The day-to-day swings of the stock market generally don't excite me. But today's spectacle qualifies as economic news--though I'm not sure just how. Was it a response to the Asian markets plunge, which was itself a response to some rumblings by the Chinese government? Was it Greenspan? Was it Drudge? Was it the durable goods orders?
I'm pretty skeptical of those who have a ready explanation for events like this. Felix Salmon gets it, and in turn he names two others who get it (Dan Gross and Andrew Leonard). Truth is, the markets have had a good run in the last few months. Yesterday erased part of that, but only part. The question is what will happen in the next few days to weeks. And I'd say roughly half of the folks with an opinion on this will be wrong.
Lest we forget, there were some 500 point drops in the late 1990s that did not presage immediate disaster. Don't interpret that to mean that I think this is nothing to worry about. Clearly a number of factors are less favorably aligned today than in 1997 and 1998 when we weathered a much more severe crisis from Asia. Of course, when those events hit, the Fed did ease monetary policy, just as many of us wanted them to. Are they more likely to ease because of this? Yes. Twice as likely as a sensible person might have thought last night? That's a tougher sell. But although I have been expecting them to stand pat, I am not above revising my priors. But I'll wait until things settle down a bit before acting on them.
It promises to be an interesting Wednesday.
Posted by William Polley at February 27, 2007 10:30 PM
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Comments
The stock market drop didn't worry me as much as the bad news on 4th quarter real GDP growth released today by the BEA. Consumption, net exports, and government purchases grew but the investment sector is really shakey.
Posted by: pgl at February 28, 2007 2:44 PM