IU lecturer on what to know about stock market’s downturn
INDIANAPOLIS (WISH) — The stock market on Tuesday was down again after sliding sharply on Monday amid uncertainty over tariffs.
A finance professor at the Indiana University Kelley School of Business said what we’re seeing is not historically uncommon. Joe Fitter, a senior finance lecturer, told I-Team 8, on Tuesday, “This is not actually too unusual. We normally have 10%-15% down legs in the market every 12-18 months. What makes this more newsworthy is we haven’t had a downturn like this in probably two years.”
Fitter says the main factors at play are uncertainty about tariffs, something President Donald Trump has changed his mind about several times since taking office; high interest rates and inflation; and a weakening job market with federal and private jobs going away.
He says that creates something called “stagflation,” something Americans haven’t seen since the 1970s.
“We have higher-than-normal inflation and a slowing economy. That’s created a lot of anxiety from investors, and they’re hitting the ‘sell’ button. At the same time, we have a market that’s gone up and up and up for two years. It’s kind of highly-valued right now, maybe over-valued. So, in some ways, it’s just reverting to the mean.”
Worried about what this downturn means for your portfolio?
Fitter said an investor’s plan of action depends on their age. “My advice to those who are younger is to continue to investing in the stock market. Don’t hit the panic button. Don’t hit the ‘sell everything’ button. Just stay with it. This is fairly normal.”
For older people, balance is key. “Have a few years worth of cash, or bonds that tend to be safer than stock. So that if we go through a downturn for one, or two, or three years, you’re not selling stock as the stock market has come down. You can use money from those other asset classes to sustain you until the market recovers.”
Fitter says nobody knows what the stock market will do in the next year or two because nobody has a crystal ball, but his guess is that the economy will not go into a recession.
