Here’s what was behind the Dow’s disastrous day

October is the most volatile month for the stock market. Everybody knows that.

And Wednesday was a good example of what can happen without any real warning.

The Dow Jones industrial average declined by 831.83 points, or nearly 3.2 percent. And over-the-counter stocks, including technology high-flyers, did even worse.

Depending on which measure you use, this was the worst day for Wall Street either this year or going back to the panic that followed Britain’s Brexit vote in 2016.

What caused Wednesday’s selloff? A lot of things and nothing at all.

What I mean is that there are plenty of reasons the stock market should be declining — the trade war with China and the fact that the Federal Reserve is raising interest rates vigorously are the two obvious ones.

There’s also the huge and growing US fiscal deficit. And political battles in Washington that started during the last presidential election seem endless and should unnerve investors.

There are also financial problems in Italy and Venezuela, a big oil exporter. And even a weakening economy in China, one of our biggest trading partners, is cause for concern that this could hurt US businesses even if the trade war abates.

In the global economy, we find that anyone else’s difficulties can have a big impact on the financial markets and the US economy.

So which of these was directly responsible for Wednesday’s selloff? None, unless you want to blame the fact that investors suddenly became aware that the “Wall of Worry” Wall Street says it likes to climb became too high.

Stocks have been weak since late last week when investors snapped out of their coma and realized that interest rates are climbing and that Fed Chairman Jerome Powell planned to keep raising them.

Powell went out of his way to be clear that he was worried about inflation and that rates were too low and feeding too much juice into the US economy.

Source: New York Post

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