Editor's Note: It was originally reported that $10 trillion had been erased, but it's been revised to $3 trillion. The post has been updated.
Monday got off to a disastrous start for the world economy. The Dow Jones plunged 1000 points–or 6.5 percent–upon the opening bell thanks to the volatile economic situation in China. As Cortney wrote earlier today, the market recovered roughly half of its losses by the time trading was suspended for the day. The New York Times compiled the butcher’s bill–and it was quite steep. $3 trillion was erased from the global stock market since the June 3 peak, the Chinese Shanghai Index lost all of the gains it has made this year, European stocks dropped 5 percent or more, and the U.S. S&P 500 closed four percent down. At the same time, many analysts knew a recalibration of our bull market bearings was due. Right now, all eyes are on government policy:
“Everything is going to be dictated by government policy,” said Kevin Kelly, the chief investment officer of Recon Capital Partners. “Whatever noise is coming from policy makers is going to determine the next couple weeks.”
The conversation about government policy is playing into a broader debate about the global economy’s ability to continue growing without the sort of extraordinary stimulus that has become the norm in recent years.
Investors’ worries over China’s economic slowdown and a souring view of emerging economies have rattled financial markets around the world in recent days, and showed no signs of letting up.
“There was a huge amount of negative sentiment built in this morning,” said Dan Greenhaus, the chief global strategist at BTIG.
Many analysts have said that a correction to stock market valuations was overdue after a long bull market. And it is too early to say how the financial market slump will affect the underlying global economy where goods and services are actually produced and consumed.
Many of the world’s central bankers will have a chance later this week to compare notes and discuss whether new policy steps are needed when they gather, along with finance ministers and academics, in Jackson Hole, Wyo., for the Federal Reserve Bank of Kansas City’s annual conference.
The lack of coverage about China’s economic woes is due to the fact that Tom Brady’s deflated footballs were deemed much more newsworthy. After analyzing a month’s worth of broadcasts, the Media Research Center discovered that “deflategate” received five times more coverage on the Big Three–ABC, NBC, and CBS, than China’s struggling economy:
In a month of coverage, from July 18 to Aug. 18, China’s economic situation was discussed for just 3 minutes and 11 seconds on the network evening news programs. That coverage was entirely on CBS and ABC and even included a political story about Donald Trump that made a passing mention of China’s currency devaluation. In contrast, ABC, CBS and NBC spent 18 minutes and 21 seconds on Brady’s appeal and courtroom appearances: more than five times more.
China devalued its currency, called the Yuan, in what ABC World News Tonight with David Muir referred to as “a surprise move” on Aug. 11. That send the Dow Jones Industrial Average down more than 200 points that day. The entire story was a mere 11 seconds long.