Recession fears drive significant stock market losses Monday

(The Center Square) – The U.S. stock market saw significant losses Monday after opening with sharp declines that did not bounce back.

The Dow Jones Industrial Average fell more than 2.5%, or over 1,000 points on Monday, while the NASDAQ Composite declined over 3%. The S&P 500 fell 3%.

Experts pointed to fears of a recession in the U.S. that helped push Japan’s market to its worst trading day since 1987 and kept the U.S. market struggling Monday.

Competitive Enterprise Institute Senior Economist Ryan Young told The Center Square it is too early to panic.

“My main goal is to get people to calm down,” said Young, who called Monday’s downturn “not a big deal.”

“Stock markets are volatile and react to short term news,” he continued. “If you’re an investor, you react to the long term.”

The news in question includes poor job numbers released by the federal government on Friday that showed unemployment rose, continuing a steady trend as it is now over 4%.

Unemployment has been consistently low for a lengthy streak now, a bright spot in the economy amid stubborn inflation in recent years.

Young said the current unemployment number is good, but if the upward trend continues it could be a problem.

Young pointed out there are some “warning signs” including inflation, fiscal irresponsibility in Washington, D.C., and the rise in unemployment.

Whether the downturn is an anomaly or a trend will be key for affecting optimism and how the market and the broader economy performs the rest of this year.

In an election year, that is crucial, especially for incumbent Democrat Vice President and presidential nominee Kamala Harris, who already faces criticism from her opponent, former President Donald Trump, about poor leadership and an economic “Kamala crash.”

“Voters have a choice — Trump prosperity, or the Kamala crash & great depression of 2024, not to mention the probability of World War lll if these very stupid people remain in office,” Trump said in a statement Monday. “Remember, Trump was right about everything!!!”

Trump’s comments are an apparent reference to his 2020 prediction that if Biden is reelected the stock market would “crash.”

Notably, President Joe Biden released a statement honoring top economic advisor Gene Sperling as he left the White House.

The Associated Press reported Monday that Sperling, who worked in the Clinton and Obama administrations, is going to work as the Senior economic advisor for the presidential campaign of Vice President Kamala Harris.

“Gene joined my administration as the only person to have ever directed the National Economic Council under two presidents, and has helped me execute a rescue plan that has led to one of the most equitable and resilient economic recoveries ever,” Biden said in a statement.

As The Center Square previously reported, billionaire investor Warren Buffett of Berkshire Hathaway sold about half of his stock in Apple, which on Monday saw a roughly 5% decrease in its stock price.

“He is clearly expecting a correction of some kind or otherwise simply cannot see better investments than Treasury bills,” Billionaire Elon Musk wrote on X Sunday in response to the news. “The Fed needs to drop rates. They have been foolish not to have done so already.”

Young said dropping rates brings short term help to the markets but doesn’t address the long term economic issues.

“A one-day drop is a drop in a very large bucket,” Young said. “Stock markets love it when the Federal Reserve cuts interest rates and they hate it when they raise rates even though in the long by raising rates they fight inflation, that’s better in the long run, but stock markets will go down for a day and they bounce back the next day.”