The stock market dive is enough to make anyone anxious. But it’s too early to call it a crash, and it’s no time to panic.
Investment professionals tell us that the market is cyclical, and that unless you’re about to retire tomorrow, it’s best to sit tight.
The broader and bigger concern is what is happening in China, whose financial turbulence rippled around the globe.
Too late in the view of some experts, the regime in China tried to prop up its stock exchange, devalued its currency and on Tuesday cut interest rates for the fifth time in nine months. It’s running out of options to boost the growth that other countries now depend on.
It is easily the world’s second-largest economy, behind only the United States. Despite its size and influence, the lack of transparency in China’s economy is more like a third world nation’s. We don’t know whether official growth figures are accurate.
And if the numbers are a fiction, that raises red flags about the brand of capitalism run by China’s Communist Party, whose economic decision-making is shrouded in secrecy.
What is crystal clear is how intertwined the economies of China and America have become. China is our largest creditor, just ahead of Japan, holding nearly $1.3 trillion in Treasury bonds.
It is our second-largest trading partner, after Canada, and is the nation with which we have the biggest trade deficit. As of June, U.S. exports to China totaled $56 billion and imports $227 billion this year. (China is the third-largest export market for California products, behind Canada and Mexico). Many big U.S. corporations have been banking on a booming Chinese middle class to buy their products. If those projections are off, that will impact jobs here.
U.S. markets rebounded Wednesday. The Dow Jones industrial average closed up more than 600 points, nearly 4 percent. It was the biggest single-day point gain since 2008.
It had fallen for six straight days, the longest losing streak in three years. That cumulative drop qualified as a “correction,” and hundreds of billions of dollars of market value were wiped out, but the markets are still a long way off from the Wall Street meltdown of 2008.
All the uncertainty, however, doesn’t help our own economic recovery, as uneven as it is across the country and California. To lift the economy, the Federal Reserve has been inching toward raising interest rates after years of rock-bottom levels. Given the recent market turmoil, it wouldn’t hurt to wait.