The current stock market drop is now in correction territory - a short term market drop of 10 to 20% that occurs on average every year or two. These types of drops begin based on economic fundamentals and end on raw investor emotions. The likely fundamental reason for this correction is the realization that the Fed will have to withdraw stimulus and raise interest rates faster than planned. There’s always a point in a correction where emotions and fear overwhelm investor decisions and the market drops in a type of free fall. For most of the day yesterday the stock market dropped a huge 4%, and then rallied for positive returns. It was a trading day full of sheer emotions, which doesn’t happen frequently. As we all know, our emotional extremes are exhausting and unsustainable, and it’s the same for the stock market. We may see the bottom of this stock market drop and volatility this week. On Wednesday I will be closely watching the conclusion of the Federal Reserve meeting and how the stock market reacts.
This correction is exactly the type of market situation when I invest aggressively to build up long term investments. I sent out two buying opportunity alerts to invest excess cashand I continue to recommend acting on this opportunity. The stock market waits for no one and market correction bottoms often only last for days, or a week or two.
Photograph by: Maxim Hopman
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