Stock Market Dropping This SeptemberOctober 5, 2022
During the Great Recession, stock markets dropped continuously for 18 months. The return on the Russell 3000 Index during that time was -50.3%. In other words, the market lost nearly half its value in that time. Despite this downturn, investors continue to invest in stocks. In the long run, the risk of losing money is much less than the potential gain.
There have been a variety of reasons for the stock market to drop this year. One reason is the ongoing battle between the Federal Reserve and inflation. The Federal Reserve recently increased interest rates, causing the price of borrowing to rise. This, in turn, will reduce the demand for many goods. The combination of historically high inflation and uncertainty surrounding the global economy has led to a slump in the stock market. In addition, the situation in Ukraine is not helping either.
The major averages are headed for another losing week. For the month of September, the Nasdaq Composite is set to drop 9.1%. The S&P 500 is projected to drop 7.9%. Those who are new to investing should read a guide to investing before jumping in. If you’re a beginner, a good guide is to invest in the long term.
The US equities market is currently facing its worst first-half since 1970, and it’s hard to tell what will cause the next downturn. Inflation, the threat of recession and the collapse of consumer confidence are among the factors contributing to the problem. This toxic cocktail is likely to cause more damage to valuations. Experts disagree on when the market will recover, but the current weakness is likely to continue until the Fed’s meeting on Wednesday.
A recent Gallup poll found that investors are increasingly abandoning their stock investments. Younger Americans, especially those with long-term horizons, have been most affected by the decline. After experiencing the “Great Recession,” they may have concluded that it is risky to invest in stocks. As a result, they’ve either sold off their stocks, or have withdrawn their funds from their bank accounts.
While stock market declines can be unpleasant, they’re expected. The stock market goes through cycles, and buying usually surfaces when stocks become oversold. This means that it’s vital to control your emotions during these periods. Instead of watching the news or constantly checking your portfolio, try to stay focused on your investment strategy. Sticking to a long-term plan is the best way to make money from your investment.
A global recession may happen for a number of reasons. A major event may occur in the middle of the year. For example, the stock market’s collapse on Aug. 8, 2011 was the first time it fell on a synchronized basis in the last quarter century. The European debt crisis and the weakening U.S. economy also dampened investor confidence. A debt ceiling impasse caused the U.S. to receive its first credit downgrade in history.