After moving sideways and essentially directionless over the prior three weeks, the U.S. stock market took a tumble on Friday. Losing 981 points, or 2.8%, the Dow Jones Industrial Average had its worst day since October 2020. The dip is continuing as of this morning.
As always, a dip (or a rise) in the financial markets shouldn’t be attributed to any one development because markets are driven by a multitude of confluences. Leading the story board for this decline, according to the Wall Street Journal, were worries about slowing corporate earnings and the Federal Reserve’s plans to rapidly raise interest rates.
On the latter point, the Wall Street Journal reported on Friday, “On Thursday, Fed Chairman Jerome Powell gave investors a clear signal that the central bank is ready to tighten monetary policy more quickly and indicated that it was likely to raise interest rates by a half-percentage point at its meeting in May…. Mr. Powell’s comments injected fresh volatility into a stock market that has been whipsawed this year by the war in Ukraine, soaring inflation, and rising Covid-19 cases in China.”
There are a lot of crosscurrents now. It feels to me like these early months of the year have brought the strongest economic headwinds since 2020. As we’ve said, these are opportune times to review and discuss your investment strategy if you feel anxious about your portfolio.
For those who are saving and accumulating, uncertain times often are good periods to buy long-term investments. Although nobody knows the specific best day (or week, etc.) to buy, we financial advisors do the best we can and follow long-term strategies that align with your objectives.
If already fully invested, the best thing may be to hold tight. As proven academically, market volatility tempts our emotional selves to take action that often results in subpar outcomes, especially as we increase the frequency of watching the financial news.
Let us know if we can be helpful in any way.