PHILADELPHIA (CBS) — Stocks tumbled this morning, marking what could be the third consecutive day of heavy losses. Economist Chris Butler attempted to make sense of the chaos and indicated the origin of the fall could be based in China.
Butler told Chris Stigall on Talk Radio 1210 WPHT that markets around the globe may be reacted to decisions made by the Chinese Central Bank.
“It looks like a lot of pressure coming out of China. I think over the weekend, people were hoping that the Chinese Central Bank would actually cut interest rates to help stimulate what appears to be a pretty slow economy in China and they didn’t do it. There is speculation abound as to why they didn’t do it but I think most major markets are down about three percent today.”
He said that based on the overall strength of the economy, it was only a matter of time before something like this would happen.
“When you see that the economy is so weak, and it has been all year, you’re just prone to something triggering a massive sell off. If today plays out like this, we’ve seen it now for three straight days. Some people might say that it’s getting over done. I don’t know that it is, but I do know that I’m going to continue to watch those leading economic indicators and if they break down, then I would say people probably need to take some action.”
Butler also suggested investors should avoid making rash decisions during crashes or corrections.
“The lesson should be learned by now and that is you have to be appropriately allocated before the pain starts because once it does, it’s very difficult to make a decision as to what the direction is likely to be.”