For varying groups, market frenzy may help or hurt
Washington — The turbulence that’s roiling financial markets is punishing stock investors, raising worries for major U.S. companies and will likely produce even punier returns for savers.
Yet some Americans stand to benefit from the forces that are driving the frenzied trading. Lower oil prices and sinking interest rates are lowering gas prices, keeping inflation low and cutting mortgage rates to levels that, for some, will scream refinance.
Stocks plunged from the start Wednesday in part over fears that the weakness in Europe and Asia will cause the U.S. economy to grow more slowly than analysts and traders had expected.
A tepid report on U.S. retail sales hurt, too.
Profits of U.S. multinational companies, which have posted record increases for much of this year, would suffer from a prolonged slowdown overseas. That worry began settling over financial markets last month and has intensified since then.
Here’s how the market turmoil stands to affect different groups:
Most Americans won’t want to look at their retirement portfolios after Wednesday’s decline, which comes after the Dow fell nearly 5 percent over the previous six trading sessions. The Standard and Poor’s 500 stock index, in which many people sock much of their retirement savings, has sunk 7.4 percent from its mid-September high.
It may be wise to avert your eyes, if it keeps you from panicking. Most analysts counsel against selling stocks in the midst of a market drop.
“You don’t disrupt your long-term investment plan based on short-term volatility,” says Greg McBride, chief financial analyst at Bankrate.com. “If it’s anything, this is a good buying opportunity.”
Falling oil prices are painful for oil companies and have fanned investors’ worries about the global economy. But they’re a pretty good deal for consumers.
Oil prices have dropped nearly 25 percent since they peaked at $107 a barrel in June. Gas prices, in turn, have fallen about 60 cents a gallon to $3.17. Some analysts think they could drop below $3 a gallon by the end of the year for the first time since 2010.
That would leave consumers with more money to spend as the holiday shopping season begins.
And Americans will also pay less to heat their homes this winter. The government has forecast that people who use heating oil will spend an average $362 less than last winter.
Anxiety on Wall Street has opened another opportunity for Americans to boost their cash flows: Homeowners who qualify will be able to refinance their mortgages at lower rates.
Falling oil and gas prices are lowering inflation, making life harder for Fed policymakers and other global central bankers.
Consumer welcome low inflation, of course. But once prices actually start falling — a phenomenon known as deflation — wages can also fall. That makes people reluctant to spend.