On Friday we witnessed the Dow plunge around 666 points which caused Dow futures to fall close to 250 points. This slight plunge comes after Janet Yellen made this statement about stock prices, "well, I don't want to say too high -- but I do want to say high." Now, this slight plunge could be a healthy pullback for the economy to correct some inflated stock pricing. However, when Monday's opening bell rings we should see some serious volatility. If stocks can remain above support levels we could see a rebound. If they break those levels they could plunge further. We will just have to wait and see.
https://www.thestreet.com/story/14474023/1/stock-futures-janet-yellen.html
4 comments:
I agree with the fact that a slight plunge would be healthy for the economy to correct some inflated stock pricing. On the other hand, this slight plunge should somewhat affect consumer confidence and their optimism to invest in the future because of the high opportunity cost of investing in places with lower risk.
I also agree that while the short term affects may scare investors and frustrate businesses, the plunge is in favor of the markets long-term. Scott Minerd a global chief investment officer at the Guggenheim Partners said, "This correction is a healthy development for the markets in the long run, and the equity bull market, while bloodied, is not broken."
I recently read an article that wrote about how algorithmic trading is having an impact on the recent volatility of the market. Basically, when the market started declining, the algorithms switched from buying to selling. The algorithms intensified the recent sell off and has led to higher market volatility. Here is the link if you'd like to read more:
https://www.investopedia.com/news/how-algo-trading-worsening-stock-market-routs/
Two weeks have passed and an obvious recovery has occurred. The market will always be a roller coaster, sometimes more volatile than others. In times of decline like mentioned in this article; it is important to consider averaging down on one's current holdings versus suffering immediate loss due to fear.
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