Matthew C Klein, Columnist

Ignore the Market, Watch the Data

No need to fret about a slight decline in the shares of overvalued companies.

April 11, 2014 at 6:27 PM UTC

Matthew C. Klein writes for Bloomberg View about the economy and financial markets. He previously wrote for the Economist magazine and its economics blog, Free Exchange. Before that, Klein was a research associate at the Council on Foreign Relations, where he spent more than two years studying the history of the Federal Reserve and the intellectual history of monetary economics for an upcoming book by Sebastian Mallaby. He also worked at Bridgewater Associates, where he studied the economies of Central and Eastern Europe and advised institutional investors on asset-liability management. Klein has a bachelor's degree in history from Yale University. Originally from Chicago, he lives in New York.

OK, so it does look a bit ugly, but so what?

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Sensationalists are warning that recent declines in stock prices are the start of a crash. While that may be possible, it's hard to see why. And even if stock returns during the next few years are disappointing, that still won't tell us much about the U.S. economy.

First, let's note that the Standard & Poor's 500 Index is down about 3.2 percent from its high of a little more than a week ago. The biotech and Internet stocks that had gone up the most took the biggest hits, with declines of about 20 percent from their recent highs.