Stock Market Plunges â€" Worst Day in 5 Months!
On the second to last trading day of the month, the US stock market gave back a whopping 60% of its gains so far this year. Some might see this as bad news, but I see it as good news and here's why.
The reasons, though I might term them theories, for Friday's performance include protests in Egypt, disappointing GDP numbers, and technical support levels being broken.
In only one week, CNBC has gone from bullish to now saying the Mideast will be the next market crises.
What it really means
It boggles the mind how short our memories tend to be. Sure, the stock market had been watch-grass-grow dull so far this year, and we tend to adapt our expectations to the recent past. But guess what? Markets are volatile!
Last year, the media was on a gloomfest with the sensational story of how we just finished the worst May in 70 years. The gloominess was pervasive and persuasive, and those that were persuaded missed out on a sensational second half of the year.
Truth be told, I've been worried sick about all of the optimism on Wall Street, because it leads me to think that the stock market is overvalued. A little pessimism from CNBC makes me feel a whole lot better.
There are three lessons from today's stock market:
- Investing in the stock market is risky.
- No one really knows why the market does what it does on any given day.
- Using the media as a guide to investing will transfer your wealth faster than any annuity product I've ever seen.
Try to ignore both the media and short-term movements of the stock market.
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