by: Greg Suskin Updated:ROCK HILL, S.C. —
A looming year-end fiscal cliff and a declining European economy: These are two of the factors that experts said contributed to Wednesday’s big sell-off on Wall Street, where the Dow fell 312 points.
"It’s not the result of the election, though people are equating it to that," said Rock Hill financial adviser Kevin Smiley with Burkett Financial Services.
Smiley said his phone rang off the hook Wednesday as the stock market at one point showed a loss of 340 points.
"You have a lot of issues coming together all at one time," he said. "Like what's going to happen to the tax code next year."
Smiley is talking about the looming so-called fiscal cliff.
If Congress allows the Bush-era tax cuts to expire, that would mean a large tax increase on many Americans, reducing the money they can spend.
At the same time, mandatory government spending cuts go into effect. They would be across the board, and impact spending on everything from defense, to education to infrastructure spending on highways and other projects.
"It could cost jobs in any of those areas," said Bob Stonebraker, an economist at Winthrop University in Rock Hill.
"If the fiscal cliff is not resolved the U.S. economy will return to a recession," he said.
Another issue is the ongoing debt crisis in Europe. EU nations face continued high unemployment and declining economies. Experts say that was a main contributor to Wednesday’s slide on Wall Street. It's a crisis the United States can do nothing about, but its impact here is growing.
"As long as Europe remains in crisis they're not going to be buying our goods. That will depress the demand for U.S. products and make it harder for the U.S. to get out of its recession," Stonebraker said.
With U.S. unemployment still high, there are concerns that any action that Congress takes could slow an economy struggling to right itself.
Smiley is telling worried clients at his business to keep a long-term perspective on their investments. He's also reminding them that these problems have been around.
The election just pushed them to the back burner for a while.