Reply to thread

Message: <blockquote data-quote="NJL" data-source="post: 46162" data-attributes="member: 1435">Got this in an e-mail from my financial manager. Some good info.Market volatility continuesContinuing the rough start to 2016, world stock markets shuddered again mid-week under the weight of negative investor sentiment. The S&P 500 dropped sharply on Wednesday, then reversed course on Thursday, gaining 1.7% for the day. For 2016, the S&P 500 is down 6.0% and the MSCI EAFE, an index of developed-market stocks, is down 7.7%. The MSCI Emerging Markets Index is down 8.1% for the year.A quick scan of the headlines provides a laundry list of anxieties purported to explain the latest market volatility - a slowing China, the appreciating U.S. dollar, potential deflation, oil prices tumbling - the list of culprits goes on.What's really going onThere is no single explanation, but events so far in 2016 have clearly dampened investor sentiment. Negative sentiment often feeds on itself as investors react to scary headlines in the media (the old TV news adage "If it bleeds, it leads" applies just as well to the financial press). Given the recent memory of the financial crisis, there are those who are quick to assert "here we go again."It is understandable to feel anxiety. But things are very different now than they were in 2008:<ul> <li data-xf-list-type="ul">The U.S. economy is doing pretty well with moderate growth and strong employment gains.</li> <li data-xf-list-type="ul">The Fed has signaled that it is unlikely to tighten interest rate policy quickly, there is no credit crisis, and leverage among financial institutions is reasonable.</li> <li data-xf-list-type="ul">Much of the focus in the press has been on the impact of a slowing Chinese economy and related stock market volatility. However, trade with China accounts for less than 1% of total U.S. economic output.</li> <li data-xf-list-type="ul">Yes, oil prices are down and this is not good for energy company earnings. But lower oil prices are great for people buying gas for their cars and heating their homes, not to mention lowering energy costs for U.S. industry.</li> </ul>There are reasons for concern, but the biggest factor in recent market movements seems to be investor sentiment. Since equity prices are largely based on what people "think" is going to happen, sentiment plays a big role in determining market returns. But sentiment can change quickly, as we saw on Wednesday and Thursday. This is why getting out of the market in such times can be dangerous to your long-term performance. When sentiment turns, you can miss out on outsized opportunities to gain. Miss those crucial chances, and you could be locking in losses for a long time. And remember, equities offer long-term expected returns that are more attractive than bonds and other investments that offer short-term safety, precisely because they expose investors to additional risk. Stock market drops like we have seen so far in 2016 are fairly common. In fact, we have had nine drops of more than 6% since 2009 - a time period where markets have more than tripled.</blockquote>

Verification: What is the most common fish caught on this site?

Reply to thread

Recent Posts

Friends of NDA