California Economic Forecast Director reacts to market volatility in midst of Iran conflict
SANTA BARBARA, Calif. (KEYT) Monday's roller coaster ride before the closing bell marked the end of the trading day on Wall Street shows that the war in Iran and comments made by President Donald Trump impact investors.
California Economic Forecast Director Dr. Mark Schniepp said Monday turned out to be a good day.
"The markets opened up sharply down, in fact severely down, investors came in and saw this as an opportunity to buy at a low price and they drove the market up quite a bit and so actually all the indexes finished up strongly today, so it was a wild volatile day and we ended in a better position than we were on Friday," said Schniepp.
It was as if nothing happened over the weekend.
But as the war entered its second week a strike on a refinery in Iran drove oil prices above $119 a barrel.
"Those rose significantly at the open but the President calmed the markets down and we saw prices reverse and that really drove investors to go on a buying spree, so we are back to normal," said Schniepp.
He called Wall Street a leading indicator for Main Street and said prices will be more volatile than they usually are in a day to day market during the conflict in Iran.
"It is a foreboding warning of what could actually happen over the next several months, I mean Wall Street is a futures market not a present day market so that is what we will watch very carefully," said Scniepp.
President Trump's communication skills played a role on Monday.
"He does tend to calm the markets by his calm demeanor with these things, according to Trump the war is going very well."
While talking to reporters on Monday afternoon President Trump suggested the end of the war could be near.
"It is the beginning of building a new country, they have no navy, no air force, no anti-aircraft equipment, it has all been blown up, they have no radar, they have no telecommunications, and they have no leadership, it is all gone, so you can look at that and we call it a tremendous success right now," said President Trump.
He added that the U.S. military could leave it at that or go further.
Economists and investors are listening to every word.
"I don't think that this war is going to affect the markets much unless we get some kind of episodic change in the event."
President Trump also said he knew oil prices would go up.
Schniepp said the economy is doing well.
"Growth is moderate, but it is likely to pick up this year, earnings reports among firms have been very very good and inflation is actually doing better than we thought it would do so let's watch how things progress," said Schiepp.
He said people will have to wait and see when it comes to tariffs struck down by the U.S. Supreme Court last month.
"It will takes years before that really has to settle out, I don't think that is going to be a big issue if here is or has to be a big rebate, that is one of the things the Supreme Court did not finish," said Schniepp.
He thinks the economy is going to do well this year.
"We are in the fourth year of a bull market so things could get volatile because of that, that tends to be the case with older bull markets, nevertheless the economy is going to do very well this year, so I don't expect any kind of problems with recession or lower growth than expected, so I would stay the course," said Schniepp.
But affordability remains an issue especially when it comes to housing.
"Economic growth seems to be in decent shape right now we don't see anything that is getting out of whack that would create any recessionary conditions, inflation is likely to continue to move laterally or fall towards the end of the year, interest rates are probably going to inch downward all year long and it may help the housing market more than we have seen over the last several years," said Schniepp.
"Schniepp received his doctorate in economics at UCSB and often gives talks about the economy in Santa Barbara County.
For more information visit https://californiaeconomicforecast.com
