5 Reasons Stocks Will Keep Falling

Oct. 10, 2008 7:21 AM ETDIA, SPY, QQQ31 Comments

The Dow Jones Industrial Average fell below 8600 Thursday - bleeding another 7% to continue the incredible losses that have taken place all week. It seems like the much anticipated bailout has not had the effect that many anticipated - rather than assuaging investor concerns that the worst of the financial crisis was over, it was an inadequate levy in a flood of capital out of the equity markets and into more stable gold and treasury bonds.

And there’s reason to believe that the markets will keep falling in the great financial crisis of 2008. Some major macroeconomic indicators point to tough times in coming quarters.

Here’s a top 5:

1. The U.S. unemployment rate has increased to 6.1%, with 84,000 jobs lost in August 2008 alone. Year-over-year employment is now negative, meaning there were more Americans with jobs in August '07 than in August ‘08.

U.S. Unemployment Percentage, monthly, since 1998 (Source:Bureau of Labor Stastics)

U.S. Unemployment Percentage, monthly, since 1998 (Source:Bureau of Labor Stastics)

A peek at the monthly unemplyment percentages for each month since 1998 show that we’re just a tick below a 10-year high (6.3% in 2003) - and given the economic climate, that number’s not going to shrink. 8.0% unemployment is likely…and the 10% high not seen since 1982 is even a possibility.

2. U.S. corporate tax levels are among the highest in the world, at up to 39% of a company’s income. In a credit crunch that’s making it harder for American corporations to raise money to finance growth, this tax burden is going to make it a lot harder for companies to grow, or to give their employees raises. And this means a higher unemployment rate, and lower consumer spending levels - in a vicious economic cycle that will exacerbate a recession.

Ratio of U.S. National Debt to GDP (Source:zFacts.com)


This article was written by

The Simplified Investor (http://www.thesimplifiedinvestor.com/) is a blog about stocks and market forces. People like to think the market is exclusive and stratified, but it's not that complex if you just keep things simplified. Note: Seeking Alpha editors have contact information for all contributors to enable ongoing communication regarding articles published.

Recommended For You

Comments (31)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.