How to Make Sense of Plummeting Global Markets

The globe economy is in “reasonably solid state,” according to most leading forecasts as reported by the New York Times. Yet market “volatility and direction are consistent with the prospect of a new crisis or global recession, explains Neil Irwin. The evidence does not yet indicate whether such levels of market turbulence are rational or irrational, he explains, with the S&P 500 falling 9 percent just in January and oil dropping 75 percent since summer 2014. Some analysts suggest loans to oil firms could rival the US subprime mortgage crisis that began in 2007 and spread global panic. Global investors are wary after enduring the 2007-2008 global debt crisis and recession. Irwin notes that herd-like behavior could magnify shifts and slowdowns, including those underway in the energy industry or China, the world’s second largest economy. – YaleGlobal