What You Should Know About the Recent Market Drop

This is an excellent article by Larry Swedroe (one of my “very-trusted-advisors) about what has been going on with the market over the past couple of weeks.  Larry discusses many of the factors that are affecting the market today in an easy-to-understand way.

The most interesting point though is his conclusion about what you should do – which is:

“So what should you do about all this information? Assuming you have a well-developed investment plan, you should do nothing, as your plan should have anticipated that environments like this would occur. ”

If you don’t have a plan, I suggest you get one. And then have the wisdom and discipline to stay the course.

As always, I am interested in hearing your thoughts.

Steve

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Most likely, you’ve seen how stocks have been clobbered over the past few days. The S&P 500 index has dropped almost 8 percent since its May 21 close of 1,669, the highest of the year. Bonds haven’t been immune to tough market conditions either, with yields soaring in recent weeks. The 10-year and 30-year Treasury yields ended April at 1.70 percent and 2.88 percent respectively. Yesterday, they closed at 2.57 percent and 3.66 percent, respectively.

However, what you may not have seen are some of the positives we’ve been experiencing lately. My almost 20 years of providing advice to individual investors have taught me that it’s relatively easy to stay the course when things are going well, but we tend to stray from the disciplined and winning strategy of buy, hold and re-balance when things get rough. This is why it’s important to see both sides — the whole picture helps investors to stay the course. Here are some of the positives to keep in mind.

Housing

The housing industry is rapidly improving. Home prices jumped a whopping 12.1 percent in the past year, according to the S&P/Case-Shiller composite index. The supply of homes for sale in most markets is now below normal levels. That’s creating bidding wars in some markets. And even if interest rates were to rise a further 1 percent, they would still be well below historical averages.

Interest rates

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read the complete article here: What You Should Know About the Recent Market Drop — Larry Swedroe.