Throughout history, the stock market has always been somewhat, but not perfectly, analogous to a roller coaster. Since the end of the market drop during the pandemic investors have been enjoying a relatively smooth ride, gaining altitude without too many upsetting drops. The last couple of weeks, however, have been a reminder of the volatility inherent in the stock market.
On Monday of last week the Dow Jones Industrial Average tumbled more than 1000 points and the Standard & Poor’s 500 Index shed 3%, its worst day since 2022. At its lows last week, the S&P 500 was down nearly 10% from its recent all-time high, which is the marker for correction territory. The NASDAQ did fall more than 10%, decidedly into a correction. The drop could be blamed on a variety of factors including worries about the economy, the Fed being too slow to cut interest rates, geopolitical turmoil in Ukraine and the Mideast, along with uncertainties surrounding the U.S. political landscape.
The market rebounded and rallied impressively on Tuesday and Thursday with a volatile Wednesday in the middle and closed out the week with a stable trading day and moderately higher prices on Friday. The overall comeback from the lows was incredible, almost completely recovering weekly losses (mostly from Monday’s rout), leaving the major averages only mildly negative for the week. The Dow finished the week .6% lower at 39,498 – the S&P 500 ended just .04% lower at 5,344 – while the NASDAQ Composite edged .18% lower to 16,745. In short, the market was on a wild ride last week.
Like a roller coaster, the ride up in the stock market is often exhilarating and exciting, but the drops can be terrifying. While the recent market drop may or may not be over, the moves in the market of late and last week’s rebound illustrate some important investment points and lessons. First and foremost – don’t panic. Market participants who sold last Monday didn’t have to wait long before they regretted it. Long-term investors should not be tracking daily or weekly movement and should not be trying to time the market. Remember, we believe in time in the market, not timing the market!
Looking briefly to the week ahead, besides the momentum and mood of the market, we’ll be tracking the Consumer Price Index (inflation) report for July, scheduled to be released by the U.S Bureau of Labor Statistics on Wednesday morning. Expectations are the CPI increased 2.9% on a year-over-year basis, while core CPI which excludes food and energy is expected to have risen 3.2%. On the earnings front, the week is highlighted by a couple big retailers as Home Depot, and Walmart announce quarterly results.
Back to and beyond the roller coaster discussion, we’ll close by saying that you are most likely to get hurt during fast moving rides if you move around too much, or if you get off the ride before it is over.
As always, please contact us with any questions you may have or if you would like to set up a meeting.
All the best – Southport Station Financial Management, LLC