There are many factors churning up market volatility and contributing to a frightening stock market sell-off, but chief among them is growing fear of a new recession.
With growth averaging less than 1 percent in the first half of the year, the U.S. economy is already perilously close to recession. But until the past few weeks, most economists had been forecasting a convincing pickup in the second half.
But a string of ominous economic data, showing that an already weak recovery in the U.S. may be stalling out, has led many economists to downgrade their forecasts. And now some are growing concerned that the financial market turmoil itself will further sap consumer and business confidence in a vicious cycle that will end in recession.
The growing concerns have destroyed trillions of dollars in investor wealth, taking the broad Standard & Poor’s 500 down more than 16 percent in less than a month. The Dow Jones industrial average, which lost 4 percent this week, has moved more than 100 points in 10 of the past 14 sessions.
“The recent slowdown was initially blamed on the Japanese earthquake and higher oil prices,” said Kevin Caron, a portfolio manager at Stifel Nicolaus.”Now as we move into September, because of the disruptions we’ve seen in the financial markets in August, I wouldn’t be surprised to see the data for September coming in weak as well.”
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