Is the stock market finally crashing? It's Jon from Financial MD, welcome to today's Didactic Minute.
Now you've probably seen a lot about the stock market crashing or Bitcoin crashing or all those other kinds of alarmist things and I want you to remember one thing: people get paid when you click on their stuff or watch their video, so please keep that in mind.
But let's look at the facts of what is actually happening and what does this mean to you. Well, why would the stock market go down? Is it down drastically? Is it a crash?
I would say not. At this point today, the stock market, meaning, the United States S&P 500 Index, which is an indicator of the U.S. stock market is only down between three and four points. Okay, we've certainly seen much worse. We can go back even as near as COVID when it was down 20 percent. So, that kind of thing can happen. I wouldn't necessarily call this a crash.
Most of the actual stock market or economic issues are in other countries; for example, the Bank of Japan. Raising interest rates caused Japan's stock market to go down 12 percent, so we're not nearly at that point.
Secondly, we see some turmoil in the Middle East, okay. Things like that affect us. Things like the Bank of Japan and their economy. It does affect us a little bit.
Next to that, we got a weak jobs report which comes out every month. This month was just weaker than we expected, okay, or than the “experts expected.” So those are a few reasons why we see something like that and why there can be some stock market reaction. Because when things happen in the news, people get out of the stock market, sell their stocks, want to move to cash, and that's what makes the stock market or the S&P 500 Index go down. So you got to understand why that's happening.
Number two, understanding how this actually affects you should you care, frankly. So if you're watching this, thanks. You're probably on TikTok or Instagram or YouTube or Facebook which means you're probably a younger investor, statistically, which also means you've probably got a lot of time to weather these ups and downs and so I would pose the question to you: is this something that you should be aware of? Sure, but is this something that you should actually do anything about? I would argue, yes, this is something you should do something about, and by do something, maybe this is the time for you to put more money in the stock market. Maybe this is the time to max out your Roth IRA. Maybe this is the time to pick up some S&P 500 Index funds.
So look at this as a good thing. That's how I look at it. These things happen. When the COVID dropped by over 20 percent, we were telling our clients to put some money in there. So, this is not personal financial advice; it's just something to consider.
Now if we look at the actual numbers, yes, the jobs market is a little weaker than normal, but the other economic indicators that we look at, nobody's talking about that. Those are still strong. GDP strong. Service industry numbers strong. Other corporate and profit earnings -- all the things that economists look at -- are strong. So I don't think there's really anything to worry about there.
The Federal Reserve is talking about bringing interest rates back down this year. That can be a good thing. A lot of other indicators say, “Hey, our economy is strong. There's nothing to worry about.” We've seen bigger dips like this. And finally, we always have to look at the evidence. Look at history to say what's happened before when these types of things have been going on, it came back up shortly afterward -- a short-term thing, okay.
So if it just so happens that you're watching this and you're over 55 years old, good for you, but number two, yes, maybe it's time to reallocate. Or not. Maybe you wait until the market comes back up and then you shift more conservatively. These are all options to really consider -- are you allocated correctly in the first place. If you're 55 or 60 or more and your account is dropping significantly because of stock market volatility, well, maybe you weren't allocated properly in the first place. Or maybe you were. You need to go back to your financial planner and ask those questions: Am I still aligned with my values? What are the values that I communicated to you?
So, a lot to consider. This is a long one, but there's just a lot going on. So, at the end of the day, though, I think it's really not that big a deal.
It's Jon from Financial MD, we'll see you next time.
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