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But after the Dow Jones industrial average plummeted nearly 700 points last week — pushing stocks down 11 percent from their late April peak — Wall Street investors are finally waking up to what Main Street households have known all along: The already bad economy is getting worse. And the laundry list of problems that could tip the economy into another severe downturn, if not a recession, is growing only longer.
First, there’s the debt-ceiling debate in Washington, which isn’t over yet as a special Congressional panel will try to find $1.5 trillion in additional savings by November. On top of that, there are the still-growing debt problems in Europe.
“There’s a growing sense the Continent is in denial and investors will continue to stress those markets until something gives,” said Jack A. Ablin, executive vice president and chiefinvestment officer at Harris Private Bank. “Bailouts don’t appear to be cutting it.”
And, on another front, it remains to be seen whether the Federal Reserve will step up again to try to stimulate the economy, as it did last November when it started to buy Treasury securities in hopes of keeping interest rates low."
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