Stock Market Wave or Wobble?

These are turbulent times.  The stock market is reflective of that on many levels. The average person is watching the financial returns after the stock market “corrected” itself by over 10% on February 8th. A correction is defined by a 10 to 20 % drop from a peak.  The peak of late January was 26,616.  On February 8th, it had the largest one day point drop, losing 1033 points. 

In October 1987, I was in my mid-twenties and working at a large mutual fund company in Boston.      The market dropped 508 points on Monday October 19th.  That was nearly a 22% drop. In a day! There was a sell off across the globe.  The date is now universally called Black Monday.

After that momentous fall when the Dow Jones declined to 1,738, regulators made some changes.  They developed new rules that allowed exchanges to temporarily halt trading if there are large declines.  The idea is to reduce market volatility and prevent large panic sell-offs.  The market can still go down, but more than 20% it will be halted for the day. 

I mention this to add perspective.  Perhaps thirty years ago, you were not invested in the stock market and were not paying attention.  I was because my job was on the line as well as my investments. Now, each time I hear a significant drop in market value, I look to what the percentage of the decline is.  The percentage tells the story.  This is how you should look at your investments as well.   Look at the overall percentages.

We tend to pay closer attention when the stock market goes down then up.  Leading us to be complacent about our investments until something changes.  Fear and loss are strong motivators.

Save yourself some trouble and stress.  Do not watch the stock market every day. There is so much going on in the world complicated by our government, business climate and even Facebook.  There is so much going on for one person to digest and process every day.  Better to turn off the news and take the time to take care of yourself and money for the long-term rather than be reactive in the short term. 

Let the world be turbulent.  You keep yourself on the steady path by managing your expectations, getting educated and focusing on the important things both in and out of the stock market. 


Post Script:

When I started this blog post on Friday afternoon, the market was down thirty points.  When I finished an hour or so later, the market was up 40 points.  This on a day the tariff legislation was expected to be signed and cause a market decline.  At 3 pm, I left my office for a couple of appointments.  At the last appointment as it neared 5 pm, a person commented on the large decline on Thursday.

“Did the market do the same thing today?” he wanted to know. 

My response? “ No last I looked it was up a bit.”  An hour later I saw the news.  The market had dropped by 424 points.  In the last hour of trading. This is why predicting its behavior from past actions are difficult, even during one day.  I will note that the percentage drop of the day was less than 2%.