One day after financial markets across the globe took an unexpected dip, investors are trying to figure out what, exactly, went wrong and whether the worst is over. The plunge seems to have been spurred by the Federal Reserve’s announcement that it might make major cuts to its economic stimulus program later in the year. But some, like Gene Goldman, head of research at the private brokerage and investment firm Cetera Financial Group, say “people are overreacting a little bit.” The domino effect that dropped stocks from Asia to the U.S. and Europe Thursday may actually signal a new trend of the stock market and economic fundamentals being directly tied, which isn’t necessarily the worst thing. If the Fed is slowing down on bond buying, that’s a good sign that things are actually looking up for the U.S. economy.
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