No time to panic, but it may be time to reassess strategy

Tuesday, February 6, 2018

Writing an editorial about the stock market is always hazardous, especially when it’s done the morning after a big “correction” and before the U.S. markets open.

Stock markets around the world reacted predictably overnight, following Wall Street’s lead lower.

It didn’t help that Friday’s drop was by an ominous “666” points, or that writers insisted on saying the market gave up the year’s gain — the year is only six weeks old folks.

The two-day drop represented a 6.3 percent decrease in the Standard & Poor’s 500 indexes.

President Trump, who has been taking credit for record gains, was noticeably silent on the sell-off, the White House only admitting to being “concerned.”

By the time you’re reading this, the stock market has certainly (A) recovered somewhat, (B) continued to drop (C) held fairly steady.

Market watchers say several factors led to Friday’s drop, such as a positive jobs report that caused inflation worries, along with fears that the Federal Reserve will raise short-term interest rates.

But no one is really surprised the stock market dropped, noting that declines of 10 percent or more are common in bull markets, and there hasn’t been such a correction in two years.

Past performance is no guarantee of future results reads the standard disclaimer, but there is general agreement about a few points.

1. Don’t panic. If you sell stocks now, you lock in your loss and miss out on potential growth ahead.

2. In fact, you might even consider buying more stocks at lower, relatively bargain, prices.

3. Or do nothing. It might be a good time to binge watch your favorite show and wait for the stock market to sort itself out.

While a correction is frightening, remember that it follows a 25 percent rise in the Dow Jones Industrials, and the sell-off may be just a blip.

The U.S. stock market has seen 125 corrections of 10 percent or more this century, about one a year, and has turned in positive annual gains 28 of the last 37 years.

Hearing frightening news from Wall Street might be a good reminder to check with your financial planner or investment firm, look at your portfolio and make sure it has a mix of assets you are comfortable with.

Don’t make decisions because of headlines, but you may want to adjust your strategy because of changes in your life circumstances or your time horizon.

Respond to this story

Posting a comment requires free registration: