As an investing blogger, I should acknowledge the mess that is our financial markets, these past few days the Dow Jones has fallen roughly 8.5% or lost 2,300 points from its 52-week high, the S&P has shed 7.8% or 223 points, and the NASDAQ has shed 7.1% or 538 points. So far I am seeing PANIC and BLAME/finger pointing and woooow are media outlets SERIOUSLY milking this topic that "Dow Jones" and "Wall Street" managed to trend on Twitter shortly after the markets closed.
"The worst drop in history"
One of the main headlines that have been causing panic and it's been a regurgitated phrase the past few days is that this is "the largest single-day point drop in history."
While this statement is, in fact, correct, it's not the biggest drop we've ever experienced. You see, while the numbers seem "large," it matters not, as the percentages are the only thing that matters. When the markets shed 504 points on October 10th, 1987 it was a 22% decline. Now, a 1,100 point decline today means a 4.6% decline. If you were to have a 1,100 point drop in 1987 that would equate to an almost 50% decline as the Dow was trading around 2,600 points in 1987. If anything, this drop would be considered a very mild drop in comparison to other single day percentage drops.
Is this the start something bad?
The short answer is, hopefully not, to be fair, this pullback has been LONG overdue, it's no surprise that it happened so suddenly and shocked us since all we've seen in the past 20 months or so is stocks constantly hitting a new all-time high.
We are still in a great economic cycle/expansion, that's being aided by tax reform, and slowly increasing interest rates from the fed at an appropriate rate. Granted, some naysayers may ultimately say that this tax reform is more problematic than helpful for the companies. Me, I like to think otherwise and be very bullish and optimistic about the future.
Should you buy?
The answer to that one is easy, yes, you should, as a matter of fact, you should always buy no matter what the markets are doing, every month. Problem is, this correction was craved for investors for a while who had cash on the side ready to buy any dip, however, this dip did not come for another 2 years, and with the euphoria that we've seen in the markets, it was hard not to place that cash to work. Then judgment day arrives and you're sitting there saying "oh crap, I don't have the cash to buy the dip."
The only thing I suggest is to sell off any asset you've held longer than a year that has performed phenomenally, that has made you a lot of cash and allocate that cash into a stock that has been hammered recently.
Square being one of those stocks for me, this also left me with a valuable lesson, to always have cash on the sidelines for moments like these. If, you have a ton of cash on the sidelines, then, by all means, use it.
Don't worry, relax, buy the dip
If the Dow drops 5%, 10%, 15%, 20%, 30% in the next few months, don't worry, and just purchase the dip. REMEMBER. This game is a long-term game, the short-term fluctuations should not matter, stay on course, the market will always recover.
Be fearful when others are greedy and be greedy when others are fearful
- Warren Buffett
Some encouraging tweets
Here are some encouraging tweets on the matter and just to have you refocus on your objective/priorities in the market.