STEVE INSKEEP, HOST:
People listening to NPR heard the news just a moment ago. The Dow Jones Industrial Average opened at 9:30 Eastern time just a few minutes ago, and at the beginning, was down about 1,200 points. Twelve hundred points for the Dow. The S&P 500 and other stock indices also down. This after Asian markets plunged overnight. The Nikkei Index in Japan was down about 8%, and other indices in Shanghai and Hong Kong down, as well. European stocks down. Lots of numbers, but what do they mean? Let's call Sam Stovall, the chief investment strategist at CFRA Research. Welcome back to the program, sir.
SAM STOVALL: Good to talk to you again, Steve.
INSKEEP: What do you make of this plunge?
STOVALL: Well, I think certainly it is an emotionally charged plunge, based on what I call a manufactured correction, meaning the decision to impose tariffs globally is what has spiked the uncertainty, and as a result, caused investors to sell first and ask questions later.
INSKEEP: Now, it's interesting that you mention that. I understand the anxiety on Thursday and Friday. People were shocked by the scale of President Trump's tariffs and immediately thinking about a recession, immediately thinking about inflation. But then there was a weekend, which you would think would be a moment for people to stop, reflect and maybe a moment for the administration to give some words of reassurance. And a bunch of administration officials did go on television. Aren't people reassured?
STOVALL: Not yet. And I think that a lot of sell orders built up over the weekend. And that's why the old adage, that do not sell on a Monday, because a lot of the agita that was building up over the weekend is manifesting itself in the market's activity early on, and we might be surprised that these declines get actually less and less as the day proceeds.
INSKEEP: Oh, interesting. We might have a bounce back, and that did happen on the Nikkei. They plunged even worse at the beginning of the day and then recovered slightly, although they were still drastically down. You talked about the agita over the weekend. Can you expand on that word? What kinds of conversations have you been involved with the last couple of days?
STOVALL: Well, usually the questions are, you know, where does this rank? If the S&P 500 were to fall below 20% threshold today, how quick did that make it go into a new bear market?
INSKEEP: Oh, yeah, bear market...
STOVALL: And you have to...
INSKEEP: ...Is 20% down from the peak. Go on, go on.
STOVALL: It is. And it would make it the second fastest since World War II, second only to the pandemic. And at the same time, in terms of a two-day market value loss or basically the dollar amount, it is the worst on record over the last 20 years. So the numbers don't look good, but what's the old saying? If it bleeds, it leads.
INSKEEP: (Laughter) The Dow Jones Industrial Average down a little more than 3.5%, according to the latest numbers. Even as you and I talk, it seems to have dropped a little bit more. Can you give me an idea of what, fundamentally, people are worried about here? What is it that's causing the selloff?
STOVALL: Well, the reason people buy stocks is they want a cut of the action, and the action is usually earnings. So with tariffs and the worry that global trade will be slowing down, which could then cause economies to either slow or contract, therefore, thrown into a recession, then that earnings growth is likely to be slowing and maybe even become negative. So that's really what is worrying investors. And the problem is they don't really know how far - how long - this is going to last and what kind of an impact overall it will have.
INSKEEP: Very briefly, do you talk to people who are investors who are worried that the United States has fundamentally broken the system, has fundamentally changed the system that we've lived under the last several decades?
STOVALL: Well, I think that what investors are worried about right now really is more short-term to say what kind of damage will be done to the economy and how quickly will we be able to emerge from it.
INSKEEP: Sam Stovall is chief investment strategist at CFRA Research. Thanks so much for your insights. Really appreciate it.
STOVALL: My pleasure.
INSKEEP: And the Dow Jones Industrial Average down more than 1,300 points in early trading this morning. Transcript provided by NPR, Copyright NPR.
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