Wall Street Woes Continue

The lead article in today’s New York Times, “Trouble Abroad Adds to Worries for U.S. Recovery,” describes a broad-based drop in the Dow, down 265 points, after three reports indicating reduced economic growth overseas.

The three reports include a less rosy report from the Bank of England, signs of slowing economic growth in China and trade figures showing a decline in U.S. exports. When combined with the Fed’s decision to pursue quantitative easing, that is, using its portfolio to buy more government securities to keep interest rates low, it was enough to drive investors away from the stock market and into safer U.S. Treasury securities.

For those who fear a double-dip recession, there are increasing indications we may be heading that way. On a quarter-by-quarter basis, growth has slowed from five percent in Q4 2009 to 3.7 percent in Q1 2010 to 2.4 percent in Q2 2010.

The drop in the Dow –265 points equals a 2.5 percent drop — was matched by similar declines in stock markets around the world. Meanwhile, bonds continued to grow.

One wonders when the cascade of bad economic news is going to stop. It is disheartening both for the average American — Main Street — as well as the investor — Wall Street. One day, maybe Wall Street will learn that true economic prosperity will only come when the average American is included in the growth of the economy. When consumers drive two-thirds of economic growth, and those same consumers are increasingly informed by accurate reports depicting their condition in a 24×7 news cycle, the upper class can not achieve the greatest possible prosperity unless it lifts everyone in a rising boat. The days of the rich living in a different world than the rest of us are long over.