Video: Chris Farrell on why you should relax as global markets fall

The Dow Jones industrial average plunged more than a 1,000 points after the opening bell this morning. While the index bounced back later in the day, the overall market trends don't look good.

"This is a global panic," Chris Farrell, senior economics contributor at Marketplace said Monday.

"By and large you don't want to act during a period of panic."

Farrell told MPR News host Marianne Combs that the current crisis has its roots in China's devaluation of their currency on Aug. 11.

"It's difficult to get a sense of how strong or how weak China is," Farrell said. "That's had reverberations around the world and it is having an effect on the U.S. stock market and elsewhere."

"It tells you that you want your exports to be more competitive on the global economy, and because your manufacturing sector is not doing as well," Farrell said. "That has big implications for Indonesia, Brazil, Malaysia, the rest of the emerging markets." China's markets have dropped by more than a third since the middle of June.

Although some investors have panicked, Farrell said downturns are part of the natural cycle of the stock market, but that the U.S. economy is still showing signs of strength.

"The housing market has been stronger, the economy has been continuing to grow, our employment is continuing to grow," Farrell said. "The market goes through these periods, it just does."

"Don't act when the markets are panicking," said Farrell, author of "Unretirement: How Baby Boomers Are Changing the Way We Think About Work, Community and the Good Life."

"When things calm down and folks are calling you and saying, 'The markets are really strong, you should be taking greater risks,' remember this period of time and make your adjustment before the market does another crash," he added.

One potentially positive note: The broad reverberations caused by China's devaluation of currency may mean that the U.S. Federal Reserve will wait to bump up interest rates, Farrell said.