In this week’s (barely) profitable moment, a reality check for investors has come like a slap in the face to Wall Street.
On the surface, the sell-off isn’t one for the history books. A Black Monday it is not. Normally, when the Dow drops by 2.5% to 3%, it doesn’t ruffle the feathers of the hardened traders I’ve come to know down on the floor of the New York Stock Exchange.
My daily routine for “Quest Express” has me spending hours on the floor with the traders and market makers at the NYSE. They’ve been at this a long time, and even they say this week’s volatility is like nothing they’ve ever seen.
Investors have seemed to rush to the exit one minute, and run back into the market the next.
On Monday, the swing on the Dow was more than 1,600 points.
The Dow went on a roller coaster ride Tuesday, oscillating between a gain and a loss 28 times throughout the session. The Dow fell another 1,000 pointsThursday.
Why? Well, that’s anyone’s guess. It could be the computer algorithms and high-frequency trading. Or maybe it’s the fear of interest rate hikes from the Federal Reserve and its new chair (only a week into the job). Some are blaming the latest Wall Street financial product that no one seems to understand.
Regardless of the cause, the simple fact is that the party is over. Say farewell to interest rates near zero, not just in the United States, but in the U.K., in Europe and maybe even Japan!
It was fun while it lasted. Now the lights have come on and the punch bowl has been removed. Yes, some may have quite a financial hangover to contend with, but Financial Armageddon this is not.