SAN FRANCISCO (KRON) — Over the past year, the Dow Jones industrial average has dropped by more than 2300 points. In just the past week alone, it’s fallen more than 1,500 points.
“Market’s are responding to uncertainty that’s coming from global economic policy,” said Dr. Venoo Kakar, assistant professor of economics at San Francisco State University.
Kakar says the market instability is the result of nervous investors worried about the U.K’s Brexit, the U.S./China trade war, rising interest rates and a government shutdown.
But Kakar says that if you disregard the markets, the U.S economy is actually doing pretty well. The U.S. economy is performing better than the financial markets.
She notes that unemployment is at a 50-year low and GDP has averaged about 3 percent growth in 2018.
That’s very good, she says. By definition, a recession is when GDP growth is negative for a couple of quarters and that isn’t happening.
“The danger is that if the uncertainty in the markets continues too long, it could erode confidence in the overall economy,” said Kakar.”Even if the economic fundamentals are strong if investors and consumers sentiment is plummeting and there’s a lot of pessimism that could trigger a recession.”
The professor is reluctant to make any predictions for 2019, but she says that if the issues making investors nervous can be resolved, the U.S. economy should keep chugging along.
“Right now, we have positive economic growth and our forecasts look good for the first quarter of 2019.”