The stock market is buzzing today after Japan experienced its biggest drop since 1987 on Monday. Although Japanese markets rebounded quickly by Tuesday morning, the significant drop in stocks has caught the attention of investors worldwide.
Pete Tibbles from BOK Financial appeared on New 9 at 9 to explain the stock market drop and its potential effects on the American economy. Tibbles explained that the decline was linked to a financial strategy called a carry trade.
“After COVID, central banks raised interest rates significantly to combat inflation, but Japan did not follow this trend. As a result, many people borrowed Japanese currency at low or zero interest rates and invested it in other markets,” Tibbles said.
Now, with the Bank of Japan shifting away from its ultra-loose monetary policy and starting to raise rates, investors are beginning to speculate that the Federal Reserve might cut rates more aggressively.
Tibbles advised stockholders not to panic during such market fluctuations. “If you have a diversified portfolio and a solid plan, stick with it. We have down days like this, and while it can be unsettling, it’s part of the process,” he said.
He also mentioned that he expects the Federal Reserve to cut rates in September, which could benefit borrowers. “I anticipate a 25 basis point cut initially, which might be followed by further cuts depending on economic data. There’s even a chance it could be as much as a 50 basis point cut,” Tibbles added.
According to Tibbles, market dips usually do not affect political races. “Presidential candidates might discuss financial markets, but historically, market fluctuations have not had a significant impact on election outcomes,” he noted.
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In Oklahoma, lower interest rates could encourage businesses to invest more and hire additional employees. “A decrease in rates will likely benefit companies across the country, including here in Oklahoma,” Tibbles concluded.
