A local financial expert is reassuring investors that Monday’s market decline is likely a correction and is not indicative of a global recession.
The week on Wall Street started with the Dow Jones Industrial Average toppling 1,000 points while the Nasdaq Composite was slashed by 5% and the S&P 500 shed $1.3 trillion in value. Global markets also tumbled as Japanese exchange Nikkei fell 12.4% – the worst drop since 1987 – along with France’s CAC 40 and Germany’s DAX declining 2.78% and 2.84%, respectively.
Jeremy Nelson, a partner at Element Wealth in Ridgeland, shared on MidDays with Gerard Gibert that trends had been pointing to a correction for several years and were recently punctuated by an increased unemployment report released last week in the U.S.
“The reality is that some of this has to do with the economic data we got,” Nelson said. “But, more than anything, this is a massive unwind of leverage in the global financial system.”
Nelson explained that the primary catalyst of the dip has been the reliance on the Japanese Yen over the last several years. Since the 1990s, Japan has held onto remarkably low interest rates, allowing borrowers to get loans for next to nothing. Institutions and individuals alike would then invest their borrowed money into the markets.
However, when Japanese monetary policy became more restrictive to strengthen the currency, it resulted in a global selling trend that dinged markets across the world. That being said, the financial expert does not believe the dip points to an incoming recession.
“If you are a long-term investor, you have to look at where you were at the beginning of the year or even in October – you’re still okay,” Nelson said. “This is not a bear market yet; this is a correction, and sometimes, market corrections happen really rapidly. The number one thing is to not be emotional.”
The U.S. briefly bounced back during Monday’s trading hours but not enough to counteract each of the major indexes that recorded their worst day since 2022 after the market closed. With a historic market surge since 2020,
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