What drives market volatility? Professor Robert Shiller of Yale contrasts the narrative of recent volatility with volatility in 2011. Skyrocketing volatility of the last several weeks, although painful, is normal and can be healthy, according to the analysts at Charles Schwab. In the final article, Mark Miller of Reuters analyzes recent social security inflation adjustments and how they differ from inflation actually experienced by seniors.
What’s drives market volatility now? Stock markets are driven by popular narratives, which don’t need basis in solid facts. The most prominent recent story is one of a “global slowdown” with associated “deflation,” but it is a less dramatic story than the debt ceiling debacle in 2011, according to Yale’s Robert Shiller. That more dramatic narrative ended when Congress raised the debt ceiling. The stock market soared again, once the news stopped reinforcing the fear of dire consequences.
Corrections are normal. Skyrocketing volatility of the last several weeks, although painful, is normal and can be healthy. The analysts at Charles Schwab believe the bull market still is intact, although it is in a more mature phase. Upcoming U.S. midterm elections could add to some near-term volatility, but stocks have traditionally done quite well in the year following midterm elections.
Social Security is adjusted 1.7% for annual inflation but it isn’t keeping up with seniors’ costs. The inflation adjustment is constructed to measure spending patterns of urban wage earners, but it’s pretty clear that retired people spend differently than wage earners. Mark Miller of Reuters discusses some of those differences.
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