Fears of US recession mount; Indiana University finance professor warns: ‘Don’t panic’ – Indianapolis News | Indiana Weather | Indiana Traffic

INDIANAPOLIS (WISH) Stock prices plunged Monday in a sell-off across the U.S. and around the world. Analysts say it’s in response to a weak jobs report last week. Finance professor Joseph Fitter of Indiana University in Bloomington discusses what this means for your stocks and your 401-K plan.

“I wouldn’t panic, that’s the message. Don’t go out and sell your 401K. You might not even look at it because it will upset you, but there’s no reason to panic and sell right now,” Fitter said.

There are many reasons why the market is reacting. The July employment report showed that employers added 114,000 jobs, which was less than the 185,000 openings expected.

Unemployment has also risen, both here in Indiana and across the country. Still, Fitter says it’s normal to see the stock market decline.

“You have to remember what we’ve had over the last 3, 4, 5 years: the COVID pandemic and the post-COVID phase is unusual for an economy and it’s taking a while to get over that unusualness,” Fitter said.

Fitter calls it a market correction. “A normal stock market goes through one of these 10% corrections once every 18-24 months and we haven’t had one of these corrections in about 18 months, so we’re on schedule.”

Fitter said that historically, a national unemployment rate of 4.3% is still quite low. If it hits 5%, he said that would be concerning. He added that there is no recession, at least not yet.

“I don’t think it’s necessary to talk about a recession right away. I think there’s a lot of panic in the market. There’s a lot of nervousness. Maybe assets have become overvalued, overpriced. The stock market has been too high. What it’s doing now is bringing us back to reality.”

Among the stocks that suffered a strong impact were technology stocks such as Apple, Google and Amazon.

“If you take a long-term approach, you may be 20, 30, 40 years away from retirement. This is an opportunity. It’s like there’s a sale in aisle 5 of a supermarket. Stock prices have dropped by 10 percent since the beginning of the correction,” he said.

Inflation will cool or slow over time, Fitter said, and he suggests watching the Federal Reserve and seeing if it will cut interest rates to help stimulate the economy, which could mean more investment opportunities.