Wall Street's scary losing streak could put a dent in California's fragile economic recovery.
In some ways, it already has.
The huge downturn in the stock market, punctuated by Monday's near-record fall, is costing the state's public pension funds billions of dollars. It's putting a strain on tax revenues – and could throw the just-passed state budget out of whack.
The aftershocks are being felt on the street level, too. Some real estate purchases are being postponed or canceled. Financiers are wondering if they'll be able to fund promising new tech companies.
Even businesses that are expanding are doing a double-take of sorts as they try to fathom Monday's 634.76-point drop in the Dow Jones average, the worst sell-off in nearly three years. Monday was the first day of trading after Standard & Poor's downgraded the U.S. credit rating.
"I don't know how big this is; I don't know how pervasive it is," said Winters restaurant executive John Pickerel, owner of the Buckhorn Grill chain. "When we went through this (market crash) in 2008, it was immediate and abrupt."
That said, Pickerel said he's still going ahead with two new restaurants this fall, in Roseville and Pleasanton.
And despite the market turmoil, many economists and other analysts continue to bet against a double-dip recession. The previous recession was triggered by the real estate crash.
"There has to be a driver for a recession (to occur), and I don't see where the driver is," said Chris Thornberg of Los Angeles consulting firm Beacon Economics.
Yet the market gyrations will surely hurt the economy. Consumers, feeling less wealthy and less confident, will curtail spending.
"It's a herd mentality," said Sacramento financial adviser John Allen of Merrill Lynch. "We even see it with the wealthiest people."
To read the complete article, visit www.sacbee.com.
Comments