Investors are worried about the economy because of some bad news about jobs and other issues. The NASDAQ and S&P 500, which are big stock market indexes, are losing value. Last Friday, the S&P 500 dropped a lot, and the NASDAQ fell even more. This week started with more losses, and stocks in Asia, especially in Japan, also went down a lot.
Several things are making investors nervous: companies are not making as much money as expected, new technology isn't doing well, there are conflicts in the Middle East and Europe, and U.S. politics are uncertain. The latest job report showed more people without jobs, making investors worry about a recession, although there are still more job openings than people looking and the increase in unemployment was more a result of more people beginning to look for work than people being laid off.
Even though things look bad, there was some good news. A report showed that the service industry (like restaurants, stores and travel) is doing better than expected. This is important because it makes up a big part of the economy. Also, some experts still think the economy will grow, just not as much as before.
The price that investors pay for the long term gains of the market, is the short term volatility that is part of investing. It is important to remember that corrections are normal. Historically the S&P500has experienced declines more frequently than people realize. On average:
- 5% or more, about 3 -5 times a year
- 10% or more, about once per year
- 15% or more, once every two years,
- 20% or more, about once every three years.
While more market changes are likely, experts think any big drops might not last long.
It is important to keep things in perspective:
- The economy may be weakening, but it’s not weak.
- A slower growth and slower inflation environment have historically been good for both equities and bonds.
- Don’t panic – stick to your long term investment plan
- If you panic, call you financial advisor to ensure that in these declines, that your allocations are aligned with your long term financial plan.
(All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Investors cannot invest directly in indices. Past Performance does not guarantee future results. The views stated in this piece are not necessarily the opinion of Cetera Advisor Networks LLC and should not be construed directly or indirectly as an offer to buy or sell any securities. Due to volatility in the markets, opinions are subject to change without notice. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing. )