The sudden stock market drop of February 2018 took many investors by surprise. The U.S. Dow fell 7%. Other world markets also tumbled: Japan’s Nikkei by 4.7%; Hong Kong stocks, 5.1%; and London’s FTSE 100, nearly 2%.
One day after the notorious plunge, the market surged 381 points, but by close of the same day, the increase had disappeared.
The wild ride had some investors and leading economists contemplating the deeper significance of the market fluctuation. Was this a prelude to darker financial times? Was all the good news about the economy merely just a lot of monetary smoke and mirrors?
The short answer to all those questions: This appears to be a mere—although meaningful—blip on the historical radar.
Many analysts believe the volatility of early 2018 that stirred the market angst may have emanated ironically from the robust economy. The fear that the Federal Reserve would raise interest rates to slow growth or that inflation from rising wages would kick in supposedly spurred many market investors to abandon ship.
The initial reaction to market spikes and sharp drops might be to make a quick exit or make a wrong move. It’s natural to question your investment strategy when the market gets rocky. As financial professionals, we provide these recommendations to help keep you calm, focused, and educated.
The wild market ride of February 2018 may be behind us. Or we may face more ups and downs and return to the volatility of previous years. But keep in mind that the bouncing trend lines are not necessarily indicators of pending financial doom or of pots of golden opportunities at the end of the investment rainbow.
If you have questions about current events or recent market news that may affect your strategies, contact us at 303-741-9772.