HKS Affiliated Authors
Frank and Denie Weil Director of the Mossavar-Rahmani Center for Business and Government
Charles W. Eliot University Professor
Excerpt
Excerpt
Heed the Fears of the Financial Markets. Lawrence Summers, January 10, 2016, Opinion, "Often markets are volatile at the end of a year and then settle down as a new year begins. Not this year. US and European markets closed lower on Friday after a very rough week despite a strong US jobs report. The week saw dramatic declines in China’s stock market and currency. Oil prices fell even in the face of major tension between Iran and Saudi Arabia. A week when bad market news makes the front page raises two questions. How much should forecasters and policymakers look to speculative markets as indicators of future prospects? And how alarmed should they be about the prospect of a global slowdown? Markets are more volatile than the fundamentals they seek to assess. Economist Paul Samuelson quipped 50 years ago, “the stock market has predicted nine of the last five recessions.” Former Treasury secretary Robert Rubin was right when he would regularly reassure anxious politicos in the Clinton White House that “markets go up, markets go down” on days when a market move created either joy or anxiety ..." Link