Why the markest turned volatile–and why you shouldn’t panic

By Lee Ohanian

Financial market volatility has skyrocketed in recent days. The Standard and Poors 500 Index, which consists of the 500 largest, publicly traded corporations, lost 6 percent of its value in May. This was followed by an 8 percent rise in June, but the index was down about 5 percent through August 16 from its July peak. Other stock market indexes recorded similar patterns.

Yet, the overall indices of the U.S. economy remain strong – stronger, in some cases, than in 50 or more years – which suggests the volatility, and the accompanying hints of panic, are largely misplaced for most Americans.

The value of privately owned, U.S. nonresidential capital stock today is about $25 trillion, which means investors are […]

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