Stock market volatility continues

The New York Stock Exchange continues its rocky stretch, and the Dow Jones Industrial Average was down another 205 points at close Tuesday, partially driven by fears about an economic slowdown in China.

Investors have been on a rollercoaster ride this week, but it’s no reason to panic, said Sara Walker, senior vice president and investment officer at Associated Wealth Management, a division of Green Bay-based Associated Bank.

“Sit back and breathe for a moment,” Walker said. “We did see some pretty scary numbers, and it’s very understandable to be fearful. And people are very much remembering the meltdown we had in 2008 and early 2009.”

Stocks are based on the value of businesses, and conditions don’t merit a significant decline in the value of those businesses, she said. In addition, Walker is not seeing triggers for a recession, such as high oil prices or a firm plan from the U.S. Federal Reserve to raise rates dramatically.

“Recessions, or the hint of them, is typically what triggers a real bear market, and we just don’t see that,” she said.
The market is likely going through an overdue correction, Walker said.

“In general, our conclusion is that the selling that we’ve seen is somewhat panic-oriented and it’s an answer to an overshoot,” she said.

If it is a full-blown correction, the market could continue in this sideways pattern for several months, Walker said. The historical data indicates it would take about 10 months to recover from such an event, though she said it’s difficult to predict what will happen.

“When fear is running the game, you don’t always get the response you want,” she said.

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Molly Dill, former BizTimes Milwaukee managing editor.

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