China Stumbles, Markets Tumble
Will the Volatility Continue?
The Economist called it "a snort from a dragon's nostrils." At the end of February, as China's stock market index fell by more than 8%, stock markets tumbled around the globe -- it was their steepest decline since the September 11 attacks in 2001. The Dow Jones Industrial Average dropped more than 500 points in a single afternoon.
In addition to worries about China, concerns about a possible shakeout in the U.S. sub-prime mortgage market contributed to the anxiety. And to add to the gloom, Alan Greenspan, former chairman of the Federal Reserve, commented that the U.S. economy could face a recession. In the week that has gone by, volatility has continued -- markets have recovered, only to drop again, and then climb once more.
What is causing this volatility, and what does it mean for investors? Knowledge@Wharton discussed this question with Jeremy Siegel, a professor of finance at Wharton and author of Stocks for the Long Run and The Future for Investors. Next, they spoke with Wharton management professor Marshall Meyer, who closely follows China's economy.