The Stock Market Freakout
September 22, 2024
In lazy days of summer, the stock market shocked us with a sudden decline in value and investors started to worry.
In mid-August, US stock values plummeted as measured by the S&P 500, Nasdaq Composite and Dow Industrials.
The Wall Street Journal referred to it as the “week’s market freakout”.
Then miraculously as the next trading week was getting ready to close stock market values were close to having the biggest weekly gains of the year. So much for the logic of the stock market that tanked one week and instantly recovered the next.
Investors initial concern was a weak jobs report, then the Japan’s Tokyo stock market crashed. Japan’s economy has some underlying problems that had been known for some time however suddenly this information resulted in a significant decline in stock values.
This type of volatility can be nerve-racking for investors. We know from experience that when investors are nervous that can lead to enhanced volatility, both up and down.
There is a lot to be nervous about, including two significant wars. The rising cost-of-living that is making life unaffordable for many and of course the pending US election.
You have two investment options. First, you can try to predict the short-term movement of the stock market. In my opinion that cannot be done successfully and consistently.
While writing this article I looked at the stock market graph showing the recent sudden decline immediately followed by a rebound. This was the same type of market volatility we saw at the beginning of COVID-19.
Looking at these charts where values suddenly and significantly decline or appreciate can make you understand predicting short-term stock market values is extremely difficult, and I would suggest impossible.
Peter Watson, of Watson Investments MBA, CFP®, R.F.P., CIM®, FCSI offers a weekly financial planning column, Dollars & Sense. He can be contacted through www.watsoninvestments.com. ACPI is a full-service investment dealer and a member of the Canadian Investor Protection Fund (“CIPF”) and the Canadian Investment Regulatory Organization (“CIRO”). Investment services are provided through Watson Securities of Aligned Capital Partners Inc., an approved trade name of ACPI. Only investment-related products and services are offered through Watson Securities of Aligned Capital Partners Inc. and covered by the CIPF. Financial planning services are provided through Watson Investments. Watson Investments is an independent company separate and distinct from ACPI.
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