This recent correction doesn't quite qualify as a crash yet...yet.
Almost any advisor will tell you to keep calm, think long term, buy the dip and keep investing.
So far, roughly 3 months worth of gains were wiped out in the stock market.
At this point, a wait and see strategy is really not out of the question.
Before selling your hard earned stocks, consider these factors:
• The Fed claims they will raise Interest Rates
• The new Fed chair may be a bit more hawkish than Yellen
• After the bloodbath in bonds, yields are up
• Inflation rates may be rising
• The Dollar overall has been weakening
• The Fed is unwinding their balance sheet
• The CAPE is relatively high, though not ridiculous
• The Vix spiked, though it's cooling off
• The Dow to GDP ratio is historically high
• Experts say everything is ok, which isn't always true
• This Bull run is about 9 years old
• The new corporate tax rate may help earnings in the future
Of course there are a fair few other factors we consider before buying or selling but one main question you have to ask yourself is: When do you need the money?
Passive index investing with a dollar cost average strategy has done fairly well for the last 9 years.
Whatever you do, don't panic sell.
Panic selling is the worst thing you can do.
If you do choose to sell, make sure it is for very specific reasons that suit your strategy and timeline.
Although at this point in time, having a nice cash reserve waiting to strike and ready to deploy is highly recommended.
This is a very important week for technical analysts, it will very much help determine if we are going up...or down.
Then again, when are those guys ever right? :)
The next few weeks and months could dole out quite a bit of pain, erasing much of past gains.
Ultimately, having some volatility return to the stock market keeps everyone honest and shows that everything is not all unicorns and rainbows.
Even a 20% crash from the high set on Jan 26, 2018 would still keep us in a long term uptrend.
What direction do you think the stock market is heading and what have you done to prepare yourself?
- James Miller