LAWRENCE — Wednesday’s 3.3 percent decline in U.S. blue-chip stocks and the stock market remaining lower most of Thursday morning could potentially reflect a market correction, according to a University of Kansas economist.
“The best way to think about this, so far, is a parallel to the short period of volatility that we experienced earlier in the year,” said Bob DeYoung, the Harold Otto Chair of Economics and Capitol Federal Distinguished Professor in Financial Markets and Institutions at the KU School of Business.
DeYoung is a former Federal Reserve economist and a leading scholar on performance, practice, and regulation in the banking industry.
He said there are many factors to consider about the current economy and stock market positions after several months of strong performance since a 1,175-point dip in early February.
“The market is fully valued, and investors are beginning to think that we may be nearing the end of a long economic expansion,” DeYoung said. “So, a correction is not out of the question.”
Media coverage has also focused on President Donald Trump’s criticism of the Federal Reserve’s recent practice of gradually lifting short-term interest rates, though Trump also mentioned in his comments that his economic team had “been waiting for” a stock market correction as well.
“It is unusual for a president to directly criticize the Fed,” DeYoung said, “but the president’s comments are unlikely to be the trigger for this.”