By Isaac Cohen*
Volatility has been haunting world financial markets since the start of the year. In the United States, after the worst starting week of any year of its history, in January, the Standard & Poor’s 500 Stock Index fell 5.1 percent and so far this month it has fallen 3.9 percent.
Several factors are contributing to this turbulence, initially perceived as short lived. The slowdown in the Chinese economy and hesitations among its policy makers, together with the fall in oil prices and the consequences for energy companies and for the banks that have financed them, all have contributed to the stock market correction. Additionally, there is concern about the timing of the next anticipated increase in the federal funds rate by the US central bank.
However, in contrast to financial market perceptions, other domestic indicators point to solid economic performance. For instance, unemployment in January decreased to 4.9 percent and wages are increasing, while household spending increased, in vehicles, groceries and building materials, spurred by the fall in gasoline prices.
During her last testimony in Congress, asked about the risk of a recession, Federal Reserve Chairwoman Janet Yellen said “there is always some chance of a recession in any year, but the evidence suggests expansions don’t die of old age.”
*International analyst and consultant. Commentator on economic and financial issues for CNN en Español TV and radio. Former Director, UNECLAC.