Opinion

Is This Stock Market Sell-Off The Real Deal?

By Roy C. Smith

The trouble with bubbles is that they are always called “trends” until they burst.

Yesterday the Dow Jones Industrial Average plunged 1,100 points and the S&P 500 fell by 4%, bringing the market drop of the last six trading days to just under 8%. The declines have been echoed in Europe, Asia and many emerging markets.

Is this the bursting of an over-priced stock market bubble or just an overdue but sharp correction to a fundamentally healthy economy?

Periods of sharp stock market declines can set off panics that can spread to stocks in other countries and to other asset classes, including those not normally correlated with stocks. If the sell-offs are powerful enough, they can generate enough uncertainty in the real economy to cause recessions, as they did in 1990, 2000 and 2008.

Is this one, one of those?

Read the full article as published by Financial News
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Roy C. Smith is the former Kenneth G. Langone Professor of Entrepreneurship and Finance and is an Emeritus Professor of Management Practice