The Dow Jones Industrial Average dove more than 580 points as the closing bell ended a chaotic day on Wall Street on Monday. At one point the average was down more than 1,000 points right after the market opened. It climbed up and down the rest of the day before closing down 588 points.
The fallout is making news headlines around the world, including in Denver’s Financial District. One of the causes is a plunge in Chinese markets and some experts in Colorado say we need to keep watching what happens there.
“The worst thing investors can do is panic and sell,” said Dr. Ron Rizzuto, University of Denver Professor of Finance.
Colorado financial experts are stressing caution as they work to get more information out of the Far East.
“China is trying to shift its economy from an export driven economy to a consumer based economy,” said Matt Medeiros with the Institute forWealth Management. “You expect those consumers to benefit now, and that shift is going to take some time.”
But in the past few weeks the Chinese market has dropped nearly 40 percent and the currency is down as well. Medeiros says globalization has caused problems in the U.S.
“We have to remember also that all of these economies are intertwined,” Medeiros said. “I think we’re in a spot where we need to be very cautious. It’s almost sort of an equilibrium, if you will. We need to digest the information and look at where we’ve been and where we’re going.”
He says dealing with the communist government is a wild card that analysts are having a hard time predicting.
“I’d say right now it’s too premature to give you an outlook,” Medeiros said. “It’s healthy to have a pull back when things get a bit overvalued. Unfortunately the problem is is that how precipitous they come through.”
Rizzuto says they could be moves that help China thrive in the future, and in turn the U.S. economy.
“It’s going to set in motion for them to be more competitive in the world markets. So eventually it will turn itself around,” Rizzuto said. “The markets will turn around. It will be more of a near-term phenomenon than a long-term phenomenon.”
Another reason for the uncertainty on Wall Street is the fall of oil prices. Crude oil prices closed Monday around $38 a barrel. That’s the first time since 2009 oil has closed below $40. Gold and silver prices also fell.