The recent global stock-market bloodbath has frayed investor nerves but it may end up being "a shot in the arm for the world economy."
"So, at the risk of sticking my neck out a long way, let me suggest that the equity bloodbath this year is little more than noise in the particular set of circumstances facing us," the
U.K. Telegraph’s Ambrose Evans-Pritchard writes.
"This is a stock market rout we should celebrate," he says. "We toiling workers can allow ourselves a wry smile. For most of the last eight years, the owners of wealth and inflated assets have had things their own way, while the real economy has been left behind," he wrote.
"The tables are finally turning. The world may look absolutely ghastly if your metric is the stock market, but it is much the same or slightly better" for the working class.
It's an about-face from the early years of the economic recovery, which began in 2009, when Wall Street stocks and big banks were soaring but many on Main Street felt like they were getting left behind, the
AP reported.
The divergence under way between Main Street and Wall Street highlights the difference between the U.S. stock market and the economy. The stock market's worries are centered on things like the strength of foreign economies, such as how much China's sharp slowdown will hurt exporters and businesses in other countries.
Low oil prices are crushing the shares of big energy companies and the big banks that lend to them — but leaving consumers with more money to spend after they fill up their car with cheap gasoline.
These forces have dragged the Standard & Poor's 500 index down 12.5 percent from its peak in May. Foreign stocks have lost double that. Hedge funds, which cater to the wealthiest and biggest investors, are also struggling. They lost money in January and got off to their worst start of a year since 2008, according to Hedge Fund Research.
Meanwhile, oil revenues of the OPEC cartel have crashed from a peak of $1.2 trillion to $400 billion at today's Brent prices of $31 a barrel, amounting to an $800 billion annual transfer to consumers in Europe, China, India, and even the U.S.
"This transfer acts as a shot of global stimulus, akin to a tax cut," he said. "The money is rotating out of the markets and into our pockets. Americans have hardly begun to spend their bonanza," he said.
Elsewhere, Saudi Arabia, the Gulf states, Algeria, and Nigeria – as well as non-OPEC producers like Azerbaijan – are among those feeling the deepest pain and are avoiding offsetting this gain to global consumer spending power with commensurate cuts in their own budgets. "They are running down their foreign assets and sovereign wealth funds to put off the pain of austerity," he explained.
"A clutch of distressed sellers are having to liquidate stocks, bonds, and property for month after month on a grand scale. This is the exact reversal of what happened during the commodity boom when they siphoned off their surpluses – thereby depriving the world economy of aggregate demand – and pumped up global asset prices," he said.
Economists say the split trends between Main Street and Wall Street can continue, but only up to a point. If profits fall sharply enough, for example, it could push CEOs to once again cut swaths of jobs in order to shore up their earnings. If stock prices fall deep enough, the panic in the headlines could traumatize consumers whether or not they have a 401(k), and spending could slow.
For now, though, Main Street continues to trend upward. Only 13 percent of the U.S. economy depends on exports, and the rest of it — which is mostly consumer spending — is still growing, albeit slowly.
Shoppers bought more autos, clothes and other items last month, even though the S&P 500 in that span had its worst week in more than four years.
The Commerce Department said retail sales excluding automobiles, gasoline, building materials and food services increased 0.6 percent last month after an unrevised 0.3 percent decline in December. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. Economists had forecast core retail sales increasing 0.3 percent last month.
"The markets may have decided that the U.S. is headed for recession, but obviously no one told U.S. consumers," Paul Ashworth, chief economist at Capital Economics in Toronto, told
Reuters.
"We now have a little wind in our sails. The oil dividend is coming through, and with luck China is over the worst. So cover your ears and shut out the market noise,"
Evans-Pritchard writes.
(Newsmax wire services contributed to this report).
© 2025 Newsmax Finance. All rights reserved.