'Don't Panic': What To Do When The Stock Market Sinks Like A Stone

Daniel de Visé, USA TODAY  Updated Mon, August 5, 2024

If you are one of those amateur investors who checks your 401(k) balance at every meal, today might be a good day to fast.

Stocks had bad days Thursday and Friday. Monday looks to be worse. Global markets plunged overnight, with Japan’s Nikkei 225 index posting the worst one-day return in its history. The losses spread from Asia to Europe, and then to the United States, where the S&P 500 and Nasdaq opened sharply lower.

Market reporters trotted out such terms as “rout,” “correction” and even “panic,” descriptors that invoke memories of the market’s darkest days, such as the brief COVID-19 crash of 2020 and the deeper, longer dive of the Great Recession of 2008.

Though it's hard to stay calm as the stock market reels, amateur investors should at least try.

“My best advice is, don’t panic. Really, because you can’t,” said Catherine Valega, a certified financial planner in Boston.

'Stocks are on sale today'

If anything, financial advisers say, this summer stock swoon would be a great time to buy.

“Stocks are on sale today, right?” Valega said. “If you have some cash, let’s go put some money in the market.”

But that can seem counterintuitive.

To an armchair investor, the dilemma is familiar and frustrating: We are instructed to buy low and sell high. When the stock market tumbles, your first impulse is to sell. But then you are selling low.

The stock market “correction,” in dispassionate Wall Street parlance, unfolded swiftly and with seemingly little warning.

Just last Wednesday, Federal Reserve chief Jerome Powell waved off an interest rate cut and assured the nation that the economy was doing pretty well.

“It's just a question of seeing more good data,” he said.

The rest of the week yielded mostly bad data.

A surprisingly weak jobs report stoked fresh recession fears from forecasters. Toss in gloomy earnings reports from Amazon and Intel, and together, those tidings pushed stocks sharply lower on Friday.

That news ricocheted around the globe, seeding Monday’s losses in Asia and Europe. Those losses, in turn, triggered more losses in the U.S.

Market watchers urged consumers to keep a sense of perspective. As of late morning, the S&P 500 was higher than it was at moments in April and May, although that could quickly change.

“Short-term market movement can be unpredictable, but over the long term, the trend is up,” said Erika Safran, a certified financial planner in New York. “The irony is that we rush to buy items on sale, but when it comes to investing, when prices drop, the instinct is to sell.”

And we’re still talking about one bad jobs report. Right?

A 'recipe for sudden volatility'

Well, maybe not. The job market was weakening before Friday’s alarming report. Powell cited cooling job data in his news conference Wednesday, listing it as one rationale for the Fed to begin cutting interest rates soon, perhaps in September.

To Read More:  https://www.yahoo.com/finance/news/dont-panic-stock-market-sinks-154619022.html