Our markets experienced a tough day on Monday, as the Dow Jones was down 768 at one point.  Additionally, the Dow was down 720 points last week.  The market was up about 300 points on Tuesday and ended flat today, after being down over 500 points this morning.  The market volatility is primarily in response to two things:

  • The federal bank only reduced interest rates by 0.25% last week. Some analysts expected a 0.5% interest rate reduction.
  • Renewed focus on Tariffs, primarily with China. As the White House tries to garner successions from the republic of China, China has responded by “devaluing their currency”.  Currency devaluation is viewed as “not playing fair” in the global currency markets, as it automatically makes your countries exports cheaper.  This is an attempt to offset the increased tariffs proposed by the White House.  So, we have a global game of chess taking place.  It appears neither side will give in.  These moves may dominate our markets over the next 6 – 9 months, adding to periodic market volatility.  However, the underlying economy and business growth continues to be strong, so economic news may outshine the periodic trade dispute with US and China.

So, what should investors do?

  1. Disregard the news outlets, which continue for the 5th year to predict a major market correction.  During this 5-year timeline, the Dow is up over 10,000 points.  It’s not that the media is biased, they simply know that predicting bad markets generates renewed readership.
  2. Don’t let your political passions affect your investment confidence.  Whether you like the White House or not, congress has very little to do with our markets. This is because our markets and economy are much bigger than the White House and Congress.