What Happened in the Stock Market Yesterday?
This article was originally published in October of 2018, following a particularly bad day in the stock market.
It remains one of the most consistently trafficked pages on our website, with over 250 unique monthly visitors looking for clarity about what happened to the markets.
We get it.
The stock market is different every day, and many have their fortunes tied to it in one way or another. Some people watch for fun, but many more watch because they want to feel secure and at peace about their family’s future.
We believe, however, that watching the day-to-day gyrations of the stock market is more likely to drive you mad than to help. Over the long run, the stock market is an incredible money-making machine, but it is not as obvious from one day to the next.
It is like watching a tennis match. Point to point, there doesn’t seem to be much difference between an all-world athlete like Roger Federer and the average tennis pro, but an entire career span makes it obvious who the top athletes are. The very best tennis players win points just 54% of the time. Day-to-day, stocks go up just 54% of the time*.
This means you can essentially be the Roger Federer of the stock market, but you need to stay in the game.
Are you checking in on the stock market because you are worried about your financial goals?
*S&P 500 daily performance as measured by the S&P 500 ETF SPY from 2/1/1993-11/4/2021
Read our original post below.
What Happened in the Stock Market Yesterday?
Stocks sell off.
It is an inevitable, even healthy feature of stock markets. Yesterday, the previously high-flying NASDAQ led the market lower, falling by 4%. The primary reasons given for yesterday’s move included global stock market weakness, especially in China, and fears over rising interest rates.
If anything, days like yesterday underscore the importance of diversification. While Information Technology stocks account for much of the gains this year, they sold off more than defensive sectors, such as Consumer Staples. Small-cap stocks also held up better than Large-caps. Rotations in and out of certain types of stocks happen and happen quickly. This is a good reminder why we stay invested across all economic sectors even when a sector struggles relative to the others.
The macro story is still largely positive and, while the economy is not the stock market, strong economic activity is the long-term driver of corporate earnings and thus prices. Globally, 93% of countries have growing economies and U.S. companies, despite positive year-to-date returns, are cheaper now than they were at the start of the year as earnings growth has outpaced growth in stock prices. The fundamentals remain strong.
Prior to this week, we enjoyed a period of tranquil markets as there was not a move in the S&P 500 of 1% or more in any trading session during the third quarter. If you recall, there was a similar situation in 2017. These extended bouts of calm contrast sharply against the sudden 3-4% drop. Despite the barrage of notifications pushing headlines designed to grab attention, the truth is this type of move is typical. On average, there are 3.5 days like it a year.
Yes, stocks sold off yesterday and, yes, they could continue selling off. Or they could continue setting all-time highs.
Rather than react and make big investment decisions based on a bad down day(s), we encourage investors to reflect on what a 4% decline actually means for them and their financial future (if anything at all). Are there pending life events that might require you to balance your portfolio with additional, less volatile asset classes? Are you on track to meet your goals regardless of short-term market movements?
We are here and willing to have a conversation to discuss your questions and concerns. While we won’t be adjusting portfolios based on short-term gyrations, we acknowledge these movements can be scary and are available to listen.
You need a clear strategy to protect and build your investments and assets. We always say “a great life doesn’t plan itself.” You need someone alongside whom you can trust and help you figure it all out.
Getting help is simpler than you might think:1. We listen.
Let’s have a conversation where you ask us your questions and tell us what you’d like to achieve to find out how we can help.
2. Get clarity.
Even before becoming a client, we present you with a custom plan – not a run-of-the-mill package.
3. We help you make it happen.
Consider us a partner that connects with you frequently and makes sure we are still on target to meet your specific goals.
Stop feeling stuck in a never-ending cycle of pitches that don’t fit your needs. Instead, let Burney give you peace of mind and experience our care, competence, and customized approach to wealth management.