As I write this on, Wednesday, August 26th, the stock market is up following six consecutive days of declines.This hasn’t happened since 2009, and August looks like it might become the worst month for the stock market since October of 2008.
So, is it time to panic?NO.
The stock market gets jumpy sometimes.Financial pundits need to find reasons to explain why.The most recent causes are: 1) China, a strange and powerful economic entity; 2) falling oil prices (but isn’t this beneficial to most companies?); and 3) fear of rising interest rates, the perpetual excuse for the last few years.One excuse not suggested is that the economy is in bad shape.
These may be the reasons the market has dropped 10% recently, but this is normal stock market behavior.It just seems odd because the market has done so well since the near-economic collapse of 2007/08.The Standard and Poor’s 500 Stock Index was at 683 in March of 2009.At the market close on Tuesday (August 25) it was at 1868, a remarkable 177% increase in six and a half years (Yahoo! Finance, August 25, 2015).
The stock market is not an isolated creature that reacts to certain stimuli; it is composed of thousands of companies, large and small, foreign and domestic.Individual investors and enormous financial institutions decide whether to buy overpriced Stock A or sell discounted Stock B.
This morning while ordering coffee at The Weatherstone, one of the baristas asked if I was getting lots of panicky calls from clients.I said, “No, not one.”I’m pleased to have an amazing collection of clients who either have listened to what I have said over the years or they scrupulously avoid listening to financial news.
Thank goodness this is not 2007 when the economy was fragile and things were about to get worse.“Corrections” are normal.