How to Read October's Market Selloffs
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What were the headline economic signals introduced at the start of the episode?
With your money briefing, I'm J.R. Whelan at The Wall Street Journal in New York. Sometimes it's hard to get a read on the stock market, especially in October, with what seemed like broad sell-offs at least once a week. We'll clear things up in a moment. First, these money and market stories you should know. Annual home price gains fell below 6% for the first time in a year in August.
How did housing slowdowns and rising mortgage rates shape consumer behavior in October?
That's a continuation of the slowdown in the housing market and a sign that the weakness is becoming widespread and is likely to persist in the months to come. More than five years of rapidly rising prices combined with higher mortgage rates are making homes increasingly unaffordable for buyers. Rates for a 30-year mortgage averaged 4.86 percent last week, up nearly a full percentage point from the beginning of the year. At the same time, U.S. consumer confidence rose in October to its highest level since September of 2000. Economists at the conference board say Americans' assessment of present conditions remain positive primarily because of strong employment growth.
Why did October's stock sell-offs not dent consumer confidence?
And despite a slowing housing market and rising interest rates, the proportion of consumers who say they plan to buy a home in the next six months rose in October, and a larger proportion of Americans say they plan to buy a car in the coming months. October's numerous stock market sell-offs did not seem to faze consumers.
How widespread was October volatility and which global markets were affected?
That's mainly because stocks tend to be held by wealthier Americans, and job prospects appear to matter more to lower-income consumers when gauging sentiment. And the jobless rate is at its lowest level since 1969.
For the month of October, we could view the ups and downs of the stock market like the chapters of a book. But is the book the story of strength, a coming-of-age story, a tragedy with darker clouds yet to come? Let's get some insight from Wall Street Journal columnist James McIntosh. So James, it's not just the U.S. stock market that has been experiencing gyrations and volatility in October. Markets around the world have seen and shown similar jitters.
That's right. It's been really quite messy everywhere. It's looking, well, so far like a correction in lots of places. When you put it into dollar terms, so you strip out the currency moves, most markets are down as much or more than the US. There are a few that have done a little bit better, but even they are still down. It's rare indeed to find a market that's up in October so far. This is partly because, of course, the U.S., people take their lead off the U.S. It's a big, important market. But it's also partly because people are starting to grow concerned about the economy, and that's showing up in lots of places.
Now, in terms of the U.S. market, you more or less see the story of the market as a story of strength because you see the declines as a healthy correction.
Yeah, I mean, a story of strength may be taking it a bit far. I mean, obviously, falling prices is hard to see as a great thing unless you
Did October's declines start as a tech correction or signal broader economic weakness?
are sitting on cash and want to invest it. But nonetheless, yes, I think that this is primarily about and indeed clearly started with a correction in the high-flying sort of disruptive technology stocks, the FAANGs, people like Amazon in particular, Netflix. These stocks that had made huge gains this year were also then the biggest fallers as the month as the fall started in the early part of the month. But the narrative, you started talking about this being chapters of a book, the narrative started with this correction in the tech stocks, which I regard as pretty healthy because I thought they'd gone up too far. So them coming back down, that's fine. But now people are starting to grow concerned about the economy and that's showing up in lots of different places in the markets.
Could market volatility prompt the Federal Reserve to change its 2019 rate path?
and, of course, in the generalized global sell-off, which isn't primarily about technology. That's a bigger and more worrying phenomenon, if it turns out to be right.
And, you know, the market being a forward-looking indicator, investors are very concerned about geopolitics and about the ongoing strength and ongoing recovery of the economy, like you mentioned.
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Chapters
6 chapters
1
What were the headline economic signals introduced at the start of the episode?
0:05–0:25
2
How did housing slowdowns and rising mortgage rates shape consumer behavior in October?
0:25–1:02
3
Why did October's stock sell-offs not dent consumer confidence?
1:02–1:19
4
How widespread was October volatility and which global markets were affected?
1:19–2:59
5
Did October's declines start as a tech correction or signal broader economic weakness?
2:59–3:56
6
Could market volatility prompt the Federal Reserve to change its 2019 rate path?
3:56–6:51
Speakers
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