Economic experts try to calm fears after gloomy financial news

RALEIGH, North Carolina (WTVD) — After a weak employment report sent stocks tumbling on Friday, the downward momentum continued all week with big losses.

By the closing bell, the Dow was down more than 1,000 points, the NASDAQ was down 576 points, and S.&P closed down 3%.

“This is a classic risk-off situation where people dump risky assets and buy safe assets, like a two-year Treasury bond, for example. And when you dump risky assets, prices go down,” said Cam Harvey, professor of finance at Duke Fuqua School of Business.

So far, the Federal Reserve has resisted pressure to cut interest rates as part of a broader effort to curb inflation.

“The Fed waiting this long has been very costly and I fear we will have to pay the price. I also want to make it clear that any recession is a self-inflicted wound. It was unnecessary,” Harvey said.

Although the inflation rate has fallen significantly since its peak, it remains around the Fed’s 2% target.

“The Fed needs to lead. Their track record suggests they follow,” Harvey said.

Stocks were not the only assets hit hard on Monday, cryptocurrencies were also severely affected.

“When there’s turmoil in the market, people get scared or spooked, (and) they try to cash in and sell everything in their accounts. Naturally, crypto, as risky as it is, you see people panicking and that’s when the price starts to fall,” explained Eric Meltzer, associate portfolio manager at the digital asset investment firm.

As of 5 p.m. ET on Monday, Bitcoin was down more than 7% on Monday and about 16% over the past five days. Ethereum was down 10% on the day and 25% over the past five days.

“Over the weekend, (investors) see market turmoil overseas and the first thing they might do is trade these things that they can actually trade at that moment, which is crypto. Often, crypto markets act as a predictor of what’s going to happen in U.S. stock markets over the weekend on Monday,” Meltzer explained.

Meltzer, who has been working in this field since 2017, said he typically hears from his clients during periods of extreme volatility.

“You often see in crypto markets that the rallies are equally sharp. Usually, when FOMO (Feat of missing out) hits, FOMO hits hard. And so it works both ways,” Meltzer said.

He emphasized that we should be patient despite the difficult road conditions.

“If you believe in crypto long term, there is no reason to panic,” Meltzer said.

Cryptocurrencies are mostly held by Generation Y and Z investors who have decades until their target retirement date.

But for those approaching retirement age, savings accounts are a more pressing issue.

“It changes the behavior of people who are thinking about retiring or who may soon retire and need to return to the workforce. It changes their spending. And that uncertainty means you’re not going to be doing the same discretionary spending, and that leads to slower consumer spending and slower growth,” Harvey said.

“I’m getting a pension from the military after 30 years of service. I have to keep working. There’s no stepping back. There’s no easy life anymore, I believe. You have to show respect for the community and the job,” said Robert Burton, who lives in Triangle.

After his military career, Burton spent several months out of the workforce before looking for work again, and he credits the quick turnaround for an easier transition.

“Capacity atrophies. You have to continue to rebuild, retool, upskill, reskill and learn new things,” said Burton, who now works at the Defense Technology Transition Office in North Carolina.

A study by T. Rowe Price published in March found that about 20% of retirees were working full or part time and 7% were looking for work. Nearly half of those who returned cited economic reasons for doing so.

“How can we be as self-sufficient as possible, regardless of the markets?” Burton said.

Burton noted that, considering past economic concerns, a sense of purpose is an important motivating factor.

“When you leave the military, you’re part of a community, part of a team, part of a family, part of mission-oriented organizations, especially in Army Special Operations. Where I’m from, we see these tribes as very tight-knit, and you miss that right away,” Burton said.

The cost of living remains top of mind for many Americans, especially retirees who closely monitor market conditions and their impact on their retirement accounts.

“Nearly two million working people in North Carolina have no way to save for retirement,” said Chris Brandenburg, AARP North Carolina State and Federal Advocacy Manager.

The organization supports North Carolina Work and Save, a program that would allow employees to deposit their money into a state-run account for employers that don’t offer retirement plans. The bipartisan House bill was filed last year but didn’t advance, but Brandenburg is optimistic it will advance in 2025.

“We’ve seen progress in 20 states across the country to pass a version of this legislation,” Brandenburg said.

Brandenburg described Social Security, a major source of income for retirees, as a “bread and butter issue.”

“We know that long-term solvency is a real issue for Social Security. We know that it’s expected to be an issue in a decade. Unfortunately, Congress is not known for being proactive. But this is something that we’ve been working hard on day and night to ask them to take proactive steps,” Brandenburg said.

According to an AARP survey of adults saving for retirement in April 2024, 20% of adults age 50 and older have no retirement savings, and 61% worry they don’t have enough money to support themselves in retirement.

Despite consecutive difficult trading days, the Dow (2.62%), NASDAQ (9.71%) and SThe P 500 (9.35%) has been up for the year. Bitcoin (23.45%) and Ethereum (3.47%) have also gained value since the beginning of the year.

“Try to take a long-term view when it comes to the market. It’s really easy to get overly focused and take a screenshot of the moment. But S“The average return on the P&P 500 over the last 50 years has been over 10%,” Brandenburg said.