If yesterday was the first time you have paid attention to investment markets in a while, you are probably not alone. When the Dow Jones plummets over 800 points in a day its rather challenging to find refuge from the horrifying headlines.
Interestingly enough, absolutely nothing changed today from yesterday, or for that matter, from the 3rd week of September when the Dow Jones went up 650 points.
You can search high and low for reasons that led to the market correction and while just about every doomsayer has their ideas, at the end of the day there is truly very little to attribute it to. Sure, interest rates are rising along with bond yields… but we must remember these rates are still very low by historical measures and the Fed’s policy for rate increases has so far been rather methodical and predictable.
If you follow (and you probably aren’t…it’s okay) capital goods orders, manufacturing, housing starts, interest rates etc.… you will know that absolutely nothing fundamental with the economy has changed in the last week. When we see sell offs under these conditions they are based on emotion not solid reasoning. This also means they tend to be short lived.
While no investor likes days like yesterday, those with a solid financial plan that takes into consideration that days like this will occur, will be most likely to stay the course and maybe even take advantage of the opportunity. Those without a solid financial plan, will be more likely to login to their broker’s platform, lament their loss, and make irrational mistakes that will cause much more pain than one day of market movement could ever cause.
Lets all do our best to stay the course and see what tomorrow will bring. True causes for concern come when cracks form in the economic “foundation” and those metrics like manufacturing aren’t looking so hot. Those times will come again as they always do…but it wasn’t yesterday. If you would like to read our latest Economic Update it can be found here.