There has been no shortage of discussion on these pages about the short-term fluctuating nature of the financial markets, especially in the Trump era. Well, it’s happening again, only this time, well, take a look for yourself:
Now, much of the discussion here has been about how events usually get overblown and the market and economy keep growing. However, in this case, some of the negative sentiment appears to be somewhat more persistent than usual.
Another look at the numbers
Since October 3, the Dow Jones Industrial Average has gone from a high of almost 27,000 to a current level of about 24,600, which is a drop of about 8.2%.
So, things are looking pretty bad, right?
Maybe not so much.
First, let’s take a look at the three month chart. If you notice, even though the last two months have seen some precipitous drops in the Dow average, they have also been accompanied by some steep rises, too.
Now, let’s take a look at the one-year chart. Notice something? There’s been a consistent up and down to the stock market all year. This is not new.
Let’s take a look at the three-year chart. Guess what? All the fluctuations we’ve been seeing in the last two months, and even the last year, come at the tail end of three years of growth. So, even with all the recent turbulence, we’re still way ahead of where we were at the beginning of this ride, aren’t we.
Fluctuations come and go
Finally, let’s look at today’s chart as I’m writing this. Despite the headline you see above, current trading is much higher than opening trading, even though a huge dip occurred near noon, and then bounced right back.
So, the lesson? Again, it’s about taking a deep breath and looking at long-term trends. Traders are currently panicking because they’re unsure about Trump’s “truce” with China and because conventional wisdom says a recession has to come at some point.
But, here’s the thing. We don’t know when. Nobody does. And, in the meantime, short-term fluctuations shouldn’t distract investors from long-term fundamentals that deliver capital growth over time.
UPDATE: Here’s the same one-day trading chart, except after closing. The index closed well up from opening trading, and only slightly down from the previous day’s closing level. Thus, proving, once again, that when the market goes down, it goes back up again. Drudge had to change his headline a few times this afternoon.
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