This week’s wild ride on the stock markets brought this word of advice from analysts: Get used to it.
Friday’s 170-point slide in the Dow Jones industrial average seemed almost moderate compared with other triple-digit gains and losses this week, but together, the seesaw closes contribute to a sense that financial markets are getting increasingly skittish — even as the economy improves.
The volatility goes hand in hand with lower interest rates, said Bob Johnson, director of economic analysis for Morningstar Inc., the Chicago mutual fund research firm.
Investors searching for alternatives to the historically low returns offered by risk-free U.S. Treasury bills, he said, are forced into riskier investments such as stocks, making them, in turn, more volatile.
“One of the consequences of having these low rates is that it forces people to take risks, and periodically, they tend to panic,” he said.
The Dow fell 170.50 on Friday, or nearly 1%, to 17,737.37, while the broader Standard & Poor’s 500 index fell 17.33, or 0.9%, to 2044.81, a downdraft taking both indexes into negative territory for the new year.
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