| Hi Taylor
- The stock market has me so confused right now. One day it feels
like the economy has recovered, then we're in a freefall again. What's
your take on the drastic ups and downs? - Zeke
Hi Zeke - There are times in our lives when following the stock
market too closely will only give us whiplash, and I think this is
one of those times. The Dow can be a useful gauge for certain financial
issues, but there are a few reasons you have to step away from the
markets to get a clearer picture.
sorts of people drive the market. Unfortunately, a lot of
people make a lot of money based on short-term strategies. That's
why we'll see the market go nuts in either direction when it seems
like not much in the economy has changed. A bump in oil prices
can cause a surge even as jobs data tells us the economy is still
hurting. The jumpy stock prices have a clear connection to the
fact that we don't know how or when this pandemic will end. Some
days investors feel better about the outlook, other days a spike
in coronavirus cases might have stocks selling like hotcakes.
2. Unemployment is still high. Even as places reopen and some
jobs data ticks up, we can't lose sight of the jobs lost and the
businesses operating at half capacity. There was a lot of talk
about a V-shaped recovery, but as long as people are afraid of
getting sick and companies aren't fully staffed, it seems a little
naive to be that optimistic. The Dow and the S&P will have good
and bad days as we navigate this crisis, but we have to look past
the trading days and study the actual economic data. When you
do that, you see that we're clearly not out of the woods and we
can expect rocky financial times to continue.
3. Good investments await. Unlike with the housing crisis,
our economy is on hold because all of our lives have come to a
bizarre standstill. We aren't watching a particular sector collapse,
so the recovery should be a little cleaner (when it starts in
earnest). This pandemic has brought a lot of things into focus
for all of us, and we'll see lasting changes as a result. If you
think about the products and services that have been important
to you over the last three months, that could definitely inform
your investing strategy.
| Don't judge
a book by its cover and don't judge an economy by its market fluctuations.
There are tough days ahead, but there's no need to overreact and panic
when your IRA takes a plunge. Stay safe out there!
© Taylor Kovar
June 15, 2020
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