"And telephone calls," Wang said.
Telephone calls?
"Frantic telephone calls from family and friends in China," said Wang, who grew up in China before moving permanently to the states in 1989. "They all want to know, 'should I sell this stock here?' or 'sell this mutual fund?' or 'get out of the market entirely?' Compared to dealing with these calls, baby care is easy."
You can understand why Wang's family and friends may be nervous and seeking his advice. The S&P 500 is on-pace to record its worst monthly point decline ever (but not the worst percentage decline ever), CNNMoney.com reported Friday. As of Thursday's market close, the S&P 500 had fallen 204.8 points this month. Meanwhile, the Dow had dropped 1,669 points, or 15%, as of Thursday's close.
And what were the worst percentage declines ever for S&P 500? You guessed it: the worst occurred during the Great Depression, two years after the stock market crash in 1929: in September 1931, the S&P fell an ugly 29.94%, CNNMoney.com reported.
The second-worst percentage decline? October 1987, when the Black Monday crash occurred: the S&P plunged 21.76%, CNNMoney.com reported.
Global stock markets hammered, as well
Further, this October will also go down in history as one of the worst months for foreign stock markets. The October swoon has added to what can only be diplomatically described as a difficult year for foreign stocks. So far this year, several foreign markets have recorded losses greater than 30%, and many are at multi-year lows, FT.com reported Friday. The Japanese, South Korean and Hong Kong stock markets have all lost half their value this year. European stock markets are down 45% in 2008, including a stunning 40% decline in the U.K.'s FTSE 100, known as the "Footsie 100."
Prepared for more? (Make sure you're in a decent state of mind, first.) So far this year, Brazil's stock market is down 50%, India is down 57%, Russia has plunged 73%, and China's market has slid 65%, FT.com reported Friday.
Wang said that earlier this year, several market watchers had predicted a slight downturn in U.S. and global stocks in 2008, due to a U.S. recession and slowing global growth. However, the global financial crisis stemming from U.S. mortgage backed securities defaults and the ensuing de-leveraging by institutional investors has turned what would have been a market correction into "a deep bear market, a rout."
Further, Wang is not that optimistic regarding the U.S. stock market's prospects for November, December and heading into the new year.
"I would like to say we are making a bottom at Dow 8,000 but I cannot. The global financial crisis has to be resolved first and we must return to relatively normal credit flows. Then, we have to identify an engine of growth for the U.S. economy," Wang said. "Absent that growth engine, the U.S. economy's fundamentals, particularly the outlook for both corporate earnings and job growth, look poor. And if that is the case, we will be very fortunate to hold Dow 8,000 next year, in 2009. Very fortunate."
"Which means I'm probably going to be answering a lot more calls about stocks from relatives in China," Wang said.
Market Analysis: The Dow is currently around 9,000, but the real battle is 8,000: If the bears can break through that key support and push the Dow through 7,800, then 7,600, it will not be a pleasant time for investors.
Further, as economist Wang noted, two fundamental clues that will help predict the Dow's value are corporate earnings and job creation. If each is increasing, so will the Dow.
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Reader Comments (Page 1 of 1)
11-02-2008 @ 8:15AM
nick said...
Obama is going to limit the CEO pay to 250K when he get's in. The unions will be in every company that has at least 10 workers. Their will be an open ballot, you can take that to the bank. And you white folks will pay dearly for the sins of your forefathers, REP Lewis told me that big time.