Why a ‘veil of uncertainty’ is causing global market volatility

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• Judy Woodruff:

  So, let's unpack more about this wild day on Wall Street, the relentless ups and downs in the market of late, and why concerns over China's economy are reverberating here in the U.S. now.

  Diane Swonk is the chief economist with Grant Thornton. It's an accounting and consultancy network. And she joins me from WTTW Chicago tonight.

  Diane, welcome back to the "NewsHour."

  So, let's talk about what happened today. The Dow — the Dow was down 660. You had tech stocks down their most, I guess, in seven years. What is driving this?

• Diane Swonk:

  Well, what we have is several things coming together.

  One is the uncertainty regarding China, the second largest economy in the world. And when it slows, it does have spillover effects to the rest of the world. This is an economy that literally has tentacles into every developing and developed — major developed economy in the world.

  We're also seeing out there uncertainty regarding what is the endgame with the trade war. We saw the CEA chair, as you mentioned, Kevin Hassett, say, well, this is having an impact on China.

  Well, it's also having an impact on the U.S. The U.S. manufacturing sector showed weakness today. And making conditions all that much more uncertain is that we actually, because of the government shutdown, don't have the economic data, the sort of stream of economic data we usually do.

  We will get the employment report tomorrow, because that part of the government is not shut down. The rest of the statistical agencies are shut down. And so we didn't get construction data today. We didn't get new home sales. It was a blockbuster holiday season. But we're not going to get that data.

  So we're sort of seeing the market operate in this sort of walking into a veil of uncertainty. And when you do that, you're going to see a lot of volatility. They can't see the road ahead.

• Judy Woodruff:

  Fascinating that the shutdown is having this kind of effect on thinking about the economy.

  But, Diane, explain a little more about why what's going on in China has this kind of an effect in the U.S.?

• Diane Swonk:

  Well, really, we do have a lot of exposure, as we already saw with Apple. And the CEA chair today also warned that there could be other major companies saying they're going to be making less because of China's woes.

  This is important because a lot of our profits are actually from abroad, many of them now in China. China's an important economy for our stock market. So you can't just have a trade war without it having consequences here in the U.S.

  We have also got us firms that are hesitating. They're not doing the investment that one would expect. They actually are paying taxes in tariffs. That's squeezing their profit margins. And until they know what the rules of the game are going to be in terms of global trade, they don't know where to place their bets going forward.

  So all of that is really adding to this uncertainty about not only the China situation, but how it could reverberate here in our own backyard in the U.S.

• Judy Woodruff:

  So, a healthy economy, but a lot of uncertainty as people look around.

  Diane Swonk, we thank you.

• Diane Swonk:

  Thank you.