Regular downturns are just part of being an investor
Since last week we have had noise surrounding the markets sell-off leading to a drop in stock prices.
Here are a few questions I have been asked:
Why have the markets dropped?
The markets took a marked turn downward Friday after the monthly U.S. jobs report showed that wages surged in January, representing the sharpest year-over-year gain since the recession. That stoked concerns about higher inflation because as companies raise pay, they often raise prices and that cycle can speed inflation.
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The Federal Reserve is already expected to raise short-term interest rates this year with the economy growing. But inflation worries raise concerns that the Fed will increase rates at a quicker pace. Higher borrowing rates can be a challenge for corporations over time as they want to borrow money to grow and it drives investors to bonds rather than stocks.
The selling continued Monday, in what most experts are saying is just an overdue correction. Some believe automated trading also played a role as the systems that buy and sell stocks may have been triggered.
How bad was it?
Not that bad, really.
The drop only erases a few months of gains. Plus, market pros have noted that declines of 10% or more are common during bull markets. There hasn’t been one in two years, and by many measures stocks are awfully expensive. The S&P 500 is now down 7.8% from its Jan. 26 record.
“The market drop, while understandably unsettling to investors, just takes us back about two months,” says Greg McBride, chief financial analyst at Bankrate. “Market corrections are normal, no matter how nerve-wracking they are at the time.
stock prices canadaInstead of living in fear, think of volatility as your friend. This is a mindset that will win when you combine it with great guidance/advice.
Remember that there is a difference between temporary pricing and true value.
Here is a good article to read by Tony Robbins. He writes much better than I can and he explains in an easy to understand way – why we should maintain our calm and take advantage. https://www.marketwatch.com/story/tony-robbins-on-stock-market-corrections-get-used-to-them-2018-02-02
If you have any questions or would like to chat, just let me know.
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PS- Take advantage of the markets right now and buy low!