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But Monday’s market activity was startling: The Dow Jones industrial average declined more than 1,000 points at the opening and closed with a loss of nearly 600 points.
Tuesday afternoon, The Dow declined a bit more than 200 points at the close, following a rebound earlier in the day.
Despite the recent plunge, Michael T. Tucker, a professor of finance at Fairfield University’s Charles F. Dolan School of Business, is not terribly concerned.
“Corrections happen,” Tucker told the Daily Voice on Tuesday morning, referring to a decrease of 10 percent or more in the market. Tucker noted the S&P is down 11 percent for in its high in May.
But, if anything, he thought the drop was an overreaction.
“The market tends to get carried away," he said. "The prices outrun what earnings justify."
Several reports blame fears over China’s economic slowdown and the drop of the price of oil for the decline.
The potential for The Fed to increase interest rates, which would make money more expensive to borrow, probably doesn't help, either. But, of course, judging from the recent market swings, that change in policy seems more unlikely, according to several reports.
Those who have stocks in their 401(k) retirement plans or 529 college saving plans shouldn’t worry, although Tucker said bonds could be an option for those who are concerned about market swings.
“Over the long term, stocks tend to do better than bonds,” Tucker said. “Over the short term, it's a very bumpy ride.”
Tucker said he believes the market will regain strength.
“The panic is not justified,” he said. “I think that things will come back.”
Regarding China’s markets, one of causes of the plunge, Tucker said, “How bad is the Chinese economy? We don’t know.”
But he noted that China has cut interest rates and eased some regulation on banks. These moves will help the Chinese market by giving the banks the ability to lend more money, Tucker said.
“The Chinese government is going to intervene and that makes people a little bit more comfortable that we’re not going to see a total crash in China," he said.
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