As Volatility Spikes, Watch The Economy, Not The Market

By Eric Winograd

The tremors that have battered financial markets recently have been nerve-wracking. But remember, the market is not the economy. Economic growth can persist even when markets decline, and that growth can eventually help to stop the slide.

Over the last week, US equities have surrendered their gains for the year and then some, volatility has spiked, and interest rates have jumped amid worries that the US economy may be overheating. This is all unsettling for investors, and it’s not easy to see things in perspective in the heat of the moment.

But it’s worth remembering that the US economy is still performing well and is likely to continue to shine over the next few quarters. Market volatility of this degree certainly doesn’t guarantee that we’re headed for a recession. The 1987 stock market crash was far more severe, but it didn’t lead to a recession. In fact, the market regained and surpassed its pre-crisis high within two years.

It’s also important to put the…

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