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Low Earnings, Rising Interest Rates, and Trump Tariffs To Blame For Wall Street Blues

Ball State Economist Michael Hicks says in spite of the bad news from Wall Street the good news is Indiana's economy is doing fine.

STATEWIDE -- It's been a less than pleasant last couple weeks for those of you who invest in the stock market.

The Dow Jones Industrial Average is off big time again having erased all of this year's gains.  It fell over 554 points Tuesday. Overall, the slowing in economic growth has been led by drops in tech stocks, primarily in Apple, Amazon, and Facebook shares.

However, Ball State economist Michael Hicks said the unpleasantness on Wall Street can be blamed on three completely different factors: lower than expected earnings, the fed raising interest rates, and the Trump tariffs.

"Earnings are well below stock market expectation, and that scares investors," said Hicks, who adds that is a sign that economic growth in the US is slowing.

"The federal reserve has also been raising interest rates and clearly slowing the economy. We see, for example, here in Indiana, manufacturing employment is down over the last three months. We are now below the 2017 manufacturing employment numbers."

Hicks said another possibility could be that inflation is up.

"Consumers are being a little more cautious than we thought," said Hicks. "Inflation is up this year, so that's going to start causing people, in aggregate, to delay consumption of something, maybe putting off that big purchase of a new phone until after the new year."

All in all, Hicks clarifies there is no immediate cause for alarm at the stock market losses.

"Other than to be angry at the tariffs, labor markets in Indiana are performing well," Hicks continued. "We've seen just last month another 5,000 people enter the labor force, so there are a lot of jobs available. Wages are finally starting to go up."

However, Hicks admits there is no predicting when the next recession will hit.

(PHOTO: Spencer Platt/Getty Images)

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