Dan Gross gets it. Andrew Leonard gets it too. In fact, any halfways-decent financial journalist gets it, and, if honest, would simply write a story saying “the market went down and we don’t know why”. But instead we’re inundated with “explanations”, from an assassination attempt on Dick Cheney (Daily Intelligencer: “Are investors balking because Cheney was attacked? Or because he wasn’t hurt?”) to a drop in one of the most boring economic series in the US. (Go on — quick — tell me what a durable goods order even is.)
One thing worth noting: Risk assets got hit, and the riskier the asset, the bigger the hit. Equities were hurt, and emerging-market equities were hurt more than US equities. Riskier bonds went down, safer bonds went up. In general, the markets behaved entirely rationally, and there didn’t seem to be much if any panic selling. Things are working the way they’re meant to work. If markets can go up — and they’ve been going up a lot over the past few years — then they should be able to go down too.
When the Dow hit its all-time high in October, there was a certain amount of commentary pointing out that high stock prices are mainly good for stock-market investors rather than for the economy as a whole. I wonder if anybody’s going to point out that a modest drop in the stock market is not really bad news for anybody — even stock-market investors are still sitting on healthy profits at this point.