Global stocks declined sharply Wednesday after another drop in oil prices prompted selloffs from Asia to New York. The Dow Jones Industrial index plunged more than 500 points at one point before cutting its losses in half as U.S. markets closed. The volatility and steep declines in stock futures reflect a growing sense of unease about the global economy.
What’s driving the recent market volatility? Analysts say it’s a combination of factors: the slowdown in China and the steep plunge in oil prices. We spoke with Dan Veru - chief investment officer at Palisade Capital – on Skype.
“Crude oil going lower has really sparked global fears of not just a recession in China but really a global slowdown," he said.
But the simpler explanation may be pessimism.
“CEOs today are feeling a lot less optimistic than they did just a year ago," said PriceWaterhouseCooper CEO Dennis Nally.
Nally says the accounting firm’s latest survey of business executives from over 80 countries shows about one in four believe the global economy is on the right track, compared with almost half just two years ago. Had they conducted the survey this year, the sentiment might have been worse.
“If we would have done the survey in the first two weeks of January, given the environment that exists today, it would even be worse, so it's not a pretty picture to say the least," he said.
And it’s a picture tarnished by the economic slowdown in China - according to New York Stock Exchange governor Peter Costa.
“You have to be very concerned whenever Chinese growth is lagging because that definitely has an effect on U.S. corporations and multi-nationals," he said. "There’s a lot of companies that do business with China and if their businesses cut back somewhat because of the slowdown in China, it definitely affects U.S. earnings."
Still, many believe the U.S. economy is resilient enough to weather the storm.
"We do see the risk of a recession as rather low, we put it at about 10 to 15 percent, which is pretty slim," said Standard and Poors' Beth Ann Bovino.
Dan Veru advises investors to look at the start of 2016 - as part of a larger picture.
“I believe ultimately we’ll look back on this period of time, whether it’s today or two weeks from now, that you could have made a lot of money - if you put your money to work into financial assets," he said.