Parsing the Market’s Slide

Just two weeks after the Dow Jones Industrial Average hit a three-month high, today’s sharp drop in major market indices effectively erased stock market gains for 2011. What has prompted the abrupt shift? Chief amongst the reasons, investors are increasingly concerned about the potential for a relapse into global recession, internalizing weak US economic data that was overlooked in the days and weeks preceding the resolution of the debt impasse.

While the Budget Control Act has been passed into law, the crisis itself has reinforced that policymakers remain a driver of uncertainty, undercutting businesses’ readiness to undertake new investments and hiring. Elected officials have reaffirmed their desire to refocus attention on fomenting job growth. Still, dysfunction in Washington has undercut private sector momentum.