By Steven Mayo
Here we go again. Last year it was Ebola, this year it’s China spooking the markets. As I write, volatility is much higher in the stock markets and the media is doing its best to spook investors.
We’ve been here before and we will be again. However, we are given the impression that 10% corrections are not part of investing and yet the personalities on TV act like it’s different this time! In May, the media was much more confident in the long-term global economic story than they are now. Currently they’re talking about economic slow-down.
Every correction plays out the same. An unexpected event happens, like China’s currency devaluation in August, which caused fear in its casino-like stock market, spilling over to other Asian currencies, the bond markets, and other global stock markets. With this, volatility spiked due to heavy short-term selling, as reflected in the VIX indicator dramatically rising.
Of course, the media will continue to do its best to interpret all this new information, making comparisons to a previous correction, like 2008, with which there should be no comparison made. Their reporting is to keep investors on high-alert for more bad news.
This is all entertainment.
When the Dow 30 stock index drops 1,000 points, that’s big news, but when it recovers,
they say it’s only up 4%, even though they are roughly the same. Saying 4% is not nearly as dramatic.
It appears that this market may be volatile through October but likely setting up for a
rally into the New Year. It’s important that investors keep this in mind.
This is a low interest rate environment, with way too much money still sitting on the sidelines. It is only a matter of time when fear of the stock market is replaced with fear of missing out on great opportunities.