DOW’S HISTORIC DROP
1,175- 1 175 point plunge— l its biggest b one- day d loss in history — puts the once- roaring 2018 market in the red. Is it the end of the bull market, or a buying opportunity?
The Dow Jones industrial average plunged 1,175 points Monday as stocks took their worst loss in 6 ½ years. Two days of steep losses have erased the market’s gains from the start of this year and ended a period of record- setting calm for stocks.
Banks fared the worst as bond yields and interest rates nosedived. Health care, technology and industrial companies all took outsize losses and energy companies sank with oil prices.
Market pros have been predicting a pullback for some time, noting declines of 10 percent or more are common during bull markets.
“It’s like a kid at a child’s party who, after an afternoon of cake and ice cream, eats one more cookie and that puts them over the edge,” said David Kelly, chief global strategist for JPMorgan Asset Management.
The Dow finished down 1,175.21 points, or 4.6 percent, at 24,345.75. The Standard & Poor’s 500 index skidded 113.19 points, or 4.1 percent, to 2,648.94. That was its biggest loss since August 2011, when the U. S. had its credit downgraded.
What todo?
Monday’s feverish fall immediately struck fear in the hearts of many investors and prompted them to reassess their portfolios.
But this is no time to panic. Experts say it’s critical not to overreact in the moment. That’s a oneway ticket to losing a fortune.
Instead, take a breath and carefully consider your options. Here’s some advice:
1. Don’t panic
If you completely exit stocks now, youmay miss out on potential gains ahead. Economists remain bullish on growth.
“We expect fiscal policy, financial conditions and fir ming global outlook to support strong economic growth” in 2018, Nomura economist-Lewis Alexander said in a recent note.
Experts have been predicting a correction. From the Dow’s peak of more than 26,000 in late January, it would take a 2,600- point drop to hit that 10% level.
2. Consider buying the dip
Should you take advantage of the dip to buy more stocks?
The bull market is showing age, but the good times may not be over.
The nation’s unemployment rate, at 4.1%, is at the lowest level since December 2000. The tax- cut package delivered big gains to corporations that should likely support stock prices through the year.
But if you decide to snap up shares at lower prices, be selective, advises Joe Quinlan, chief market strategist for U. S. Trust. In the U. S., Quinlan sees opportunity in financials, health care and industrials. Looking abroad, he favors stocks tied to the e- commerce boom in China and robotics production in Japan.
3. Orwait andwatch
The market may rebound in a big way following the recent turbulence, but it may take time.
Sam Stovall, chief investment strategist for CFRA, on Friday predicted further declines before stocks stabilize. That prediction played out Monday.
Given that the market has gone so long without a major setback, investorsmay be leery about jumping back in right away.
4. Realize sell- off may be a blip
Since 1900, the U. S. has seen 125 corrections of 10% or more, or about one a year. Yet the market has always gone on— eventually up.
Remember that Monday’s drop follows a 25% Dow rise last year.
“A 3% to 5% decline doesn’t scream ‘ buy’ or ‘ sell,’” said Stephen Janachowski, CEO of Brouwer and Janachowski, awealth management firm based inMill Valley, California.