Fear rather than fundamentals is largely driving share slumpspublished at 07:56 British Summer Time
Dharshini David
Deputy economics editor
Wall Street is not Main Street, and shifts in markets do not,
for the main part, reflect what’s happening in the real world at that moment.
But clouds are gathering over economic prospects – fast – as the impact
of President Trump’s universal tariffs filter through the real world.
Movement of stocks, oil prices, and so on, are largely driven by
sentiment and speculation, predictions of what may happen.
Currently, it is fear
rather than fundamentals that are largely driving share prices – fears of a
recession later in this year or next.
The markets have plunged as traders have adjusted expectations – reality
hitting that these tariffs may not be temporary – and the risk of more
countries acting in kind.
It’s not just investors but world leaders
gambling this week, deliberating whether restraint or retaliate is the
best policy. Their actions will shape global growth and inflation.
Some economists put the US’s chances of entering recession as close to
50-50, and some reckon the global economy may face a similar risk.
Between them,
China and America make close to half of global goods; the shockwaves will be
felt far from their shores. But remember, even as markets glow red, the economic
impact remains very uncertain.
