In October and November the general markets went down, many of the big gains were taken back and investors ask why? Neil Irwin of the New York Times News Service believes there was no simple answer. The problem of no simple solution is what should policy makers do? Mr. Irwin believes the market is reflecting a number of risks that each one could be handled, but if they join together then there are fewer straight forward responses.
The stock market is down 9.5%, but the bond market is stable.
The giant tech companies lead by FAANG are showing risks of slowing down, possibly new regulations but are still very profitable. Apple has bought back $80 billion worth of stock, Amazon announced it is going ahead with 2 offices in New York and Washington, DC. There is much to be positive about, but…
Oil prices have gone down, sending energy firms prices down although consumers are benefiting from lower prices at the pumps.
Sometimes investors worry about debt loads such as GE has if interest rates rise more than normal, but the fed has said it may not increase rates, although it does want to.
The trade war is still going on, although many companies have raised prices in anticipation of trade war effects on their balance sheets.
Economic growth worldwide lead by the expansion of China and Russia seems to be slowing down.
The housing market is not booming any more or is slowing down.
There are always reasons to be jittery about the stock market, however in the past many of the problems tended to be localized as the rest of the economy still moved onwards.
What the above tends to show is that adjustments tend to cause huge economic disruption only if there are compounding factors or inadequate policy responses.
What is the unknown is how do the risks react together to compound economic problems?
Linking to dividend paying stocks, while every stock owner would love to see higher prices, you can buy stock for other reasons. If you buy for the longer term ensuring you are protected by earning dividends, as long as the company is profitable then you will still earn a dividend. It is the time when stocks fall, the dividends can be used to buy more great companies at lower prices. You have the ability to have patience and overtime the prices will rise and you will be wealthier.
There are more questions than answers, till the next time – to raising questions.