Carol Roth explains Wall Street crash: 'We can still take some comfort'

Yesterday saw a massive plunge in the Dow Jones and Nasdaq indexes, sparking a global selling frenzy and leading Americans to ask the dreaded question: Is the United States headed into a recession?

Recovering investment banker and author of “You Will Own Nothing,” Carol Roth joins Jill Savage and the “Blaze News Tonight” panel to shed light on the situation.

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According to Roth, what is commonly referred to as the "Magnificent Seven” stocks – Apple, Microsoft, Google parent Alphabet, Amazon, Nvidia, META, and Tesla – “have really been carrying the stock market for the last couple of years, gaining incredible amounts of value at least on paper.”

Then, “Over the past few weeks, there started to be some cracks, I think, that investors realized — that their valuations had gotten a little bit frothy [and] that companies were going to actually have to spend a ton of money in order for their AI dreams to come true,” says Roth, “so we started to see a pullback on that.”

Then the “pullback” Roth mentions was “accelerated ... last Wednesday when the Federal Reserve Chairman Jerome Powell said that he wasn't planning to cut rates at this particular meeting, although still leaving on the table of September as a cut.”

“Then Friday came along, and we got a really ugly jobs report, so that triggered a recessionary indicator,” she explains, adding that there were also “some concerns that maybe the economy wasn't as strong as the Fed had been projecting and that they may be behind the curve when it comes to cutting rates.”

“So already we were seeing trillions of value being lost from the stock market because of this. Then we have the Middle East escalation over the weekend, and then we have Japan,” Roth tells Jill.

“In Japan, they have sort of the opposite situation happening that we have here. They had their rates at a negative level or zero for about 17 years, and finally they decided about four months ago they're going to try to normalize,” says Roth. “This Wednesday they decided to hike their rates and that created some issues and some strength with the yen and in doing so created ... sort of an unwinding of various trades that ended up creating a contagion that spilled over into the U.S. market.”

“Fortunately, our contagion, even though it was not a pretty day, was not nearly as bad [as Japan], and the good news is that this is really a breather in the market.”

“You still have the Nasdaq up about 29% for the last 52 weeks, the S&P 500 up about 26%, so while it is an ugly day, and we do need to take in sort of the totality of what's going on, we can still take some comfort that we were able to only have a few percentage points lost in terms of the contagion.”

“Mysteriously this morning, millions of people weren't able to trade at all. ... Are we normalizing this? What is going on here?” asks Blaze Media’s editor in chief Matthew Peterson.

To see Roth’s answer, watch the episode above.

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