As of this article the market as corrected a little over 500 points on the Dow. Roughly about a 4% correction. Primarily because of Federal Reserve tapering rumors. Volatility has increased, but is no where near the 2008 Credit Crisis levels, or even historic averages.
I’ve also noticed the conversations have changed by the media. They are constantly discussing the Fed’s tapering timing, and guessing at what will happen next.
With the economy barely limping along at under 2% growth, some are questioning if we are truly moving ahead.
So is it time to get nervous?
Through all the not-so-good news, there are a few reasons to feel pretty good about what’s going on:
1. Low inflation. Inflations is well below it’s historic 3-3.5%. Somewhere around 1.4% as of this article. So goods and services are not getting more expensive.
2. Earnings are good. Company earnings are good for 2013 and are expected to grow this year and into 2014. So even if stock prices are down, this is a good long-term signal. It means companies are healthy.
3. Corrections create buying opportunities. Any type of correction of 5% or more presents a great buying opportunity. Any type of correction of 5% or more may present a great buying opportunity. It’s counter-intuitive to buy during a correction; however in some instances they could present buying opportunities. Use dollar-cost averaging to your advantage if you are investing through your company’s retirement plan or 401k. It may seem counter intuitive to buy during a correction; however,
4. Rising rates signal strength in the economy. Even though the Fed will end its stimulus program at some point, its because the economy has shown signs of serious improvement. So this is a classic problem of can’t see the forest for the trees. Too much focus on stimulus and not on what the stimulus has accomplished.
Are there things to be worried about? Absolutely. However, I think there are too many extremes when it comes to just seeing positives or negatives. I try to see both sides of it, and still keep a bullish attitude about the economy’s future.
If you are truly nervous about where we are, why not write me at email@example.com, or call me at 859-225-2596 to review your situation. Why not get better educated about the markets by subscribing to The Diligent Advisor by clicking here. It’s FREE!
Investing regular amounts steadily over time (dollar-cost averaging) may lower your average per-share cost. Periodic investment programs cannot guarantee profit or protect against loss in a declining market. Dollar-cost averaging is a long-term strategy involving continuous investing, regardless of fluctuating price levels, and, as a result, you should consider your financial ability to continue to invest during periods of fluctuating price levels.