if you have paid any attention the financial news the past week some of you might have heard that the stock market had its worst week in about two years. Officially, the Down Jones is in correction territory (it is down 10% from its highs), the Nasdaq is down about 8% and the S&P is down about 7%.
If you would have read the headlines you would have thought that we were headed for a doomsday situation. There words in headlines like “market crash,” “doomsday,” “sell now,” and “get out.” If you dug even further into the articles you would have picked up those phrases and even more. People were warning about a collapse in the market, the stock market was plunging, markets were in turmoil, and was blood in the streets.
I mean if you didn’t know this news had to do with the stock market you would think there was a major revolution going on. You might have thought the economy was going to plunge into the abyss and we are headed for another great depression. Hell, I even read one op/ed that predicted the Dow may go down to 5,000, which would be about a 70% drop in total. That prediction is worth than what happened in 2007-09. Doomsday is here.
What do I think of all of these headlines? Absolute bunga. Now I am not saying that the stock market is going to go down. I am not even saying that we couldn’t even go down another 20% or so. It is possible. However, since 1900 there have been 123 corrections and 32 different bear markets. However, the stock market still averages a 10% return. Now the past is not prologue, but what we are seeing in the markets today is nothing new.
I don’t buy the fact how some people say that this time is different. They said the same thing six years ago and five years before that and 10 years before that, etc, etc.
My advice to you is don’t panic. Don’t run for the hills. Don’t hide your money under your mattress. Maybe you make some adjustments in your investments by getting a little bit more conservative or you might view this as a fabulous buying opportunity.
The current stock market is in the 7th year of a bull market. The average bull market lasts 4. It has been 4 years since we have a 10% correction and we typically average one per year. Things are little long in the tooth. We are due for some of these things to happen. The markets can’t go up all the time. They will come down. However, if you get scared every time something happens you may end up losing a huge investing and monetary opportunity.
Again, I am not saying that you won’t lose more money. I am not saying that the stock market won’t go into bear market territory (a loss of 20% or more from its highs) and I am not saying that we won’t have a recession (typically every 7 years). The truth is we are due, historically speaking, for all of these items. Does that suck? Yes. Is it bad? Yes. Do I want it to happen? No. I want people to make money to live good lives, to support their families. But I also know reality.
I would bet money that within the next five years (assuming we have a downward stock market trend in the next 2 years) that the market would be higher than what it is today. If not, it will be on the rise again. I believe that because historically it has consistently proven to be the case.
There is chaos in the world. China is slowing down, Europe is growing slowly, Greece has new elections, Brazil has an economy in recession, and the U.S. has slow growth. We face all kinds of problems. But we always have. I remember when I was a kid we faced nuclear destruction as a possibility on a daily basis. There will always be problems, hot spots in the world, etc. This time in the stock market is different.
I am going to ride this one out. Other people can do what they want. I lived through 2007-09 and was really scared. This isn’t scary to me. This is just a bump in the road. Call it me being older and wiser, but I just think I am going to ignore the headlines, grab a glass of wine, kiss Mrs. ROB, take the dog for a walk, and enjoy what I already have because life surely, at least for me, is surely not too bad.