World Economy

Rattled Investors Fear 2016 Fall

Rattled Investors Fear 2016 FallRattled Investors Fear 2016 Fall

The stock market’s awful start to 2016 has some investors fearing the worst.

The Dow Jones Industrial Average took another beating, as sharply falling oil prices, combined with ongoing concern about the strength of China’s economy, led to another major selloff. At the end of closing, the blue-chip index was down 392 points, or 2.4%.

The NASDAQ and S&P also saw significant downturns, CNBC reported.

Friday’s sell-off was just the latest blow to the US stock market, which is facing its worst opening to a new year in history. In just the first two weeks of the year, the Dow has fallen nearly 1,500 points and lost more than 8% of its value.

The steady decline is creating doom and gloom, with some investors going so far as to invoke the financial crisis of 2008.

The Royal Bank of Scotland drew headlines this week when it sent a note to investors urging them to “sell (mostly) everything.”

“Sell everything except high quality bonds,” warned the RBS analyst.

The high drama on Wall Street in 2016 appears to be at odds with the country’s overall economic picture.

The US economy continued to grow through 2015, and the Labor Department reported 292,000 new jobs were created in December, rocketing past expectations.

But even market watchers who believe 2016 could end up being a solid year for stocks doubt that the bloodletting is over.

“Having a market decline like this in the first couple of weeks of the year really, in my mind, puts a negativity across the economy,” said Laurence Fink, chairman and CEO of BlackRock, in a CNBC interview.

“I actually believe you’re going to start seeing more layoffs in the middle part of the first quarter, definitely the second quarter because of this.”

Some fear the decline in the stock market will become self-reinforcing by coloring how Americans feel about the economy.

If consumers begin to feel worse about the economy, they could pull back their own spending, creating broader decline. Consumer spending is crucial because it accounts for the majority of the US economy.

On Friday, the University of Michigan’s consumer sentiment index actually rose to its highest level since June. But experts are not expecting those gains to last, given the bad news in the markets.

The stock market’s woes began on the first trading day of the year, when Chinese markets plunged on fears of an economic contraction in that country.

The sharp decline in oil prices this week only amplified the angst.

The pending arrival of new oil out of Iran, alongside with the likelihood of falling demand for fuel in China, helped push oil prices to levels not seen in more than a decade. Oil dropped below $30 a barrel earlier in the week, a level not seen since 2003.

But there are others who see a silver lining. Some analysts note that while the markets have had a rough start to the year, there’s plenty of data that indicates the US economy overall is relatively strong, particularly compared to other economies worldwide.