Market dips as bond yields rise, but smart investors take a long-term approach
The stock market has taken a dip lately and we’re seeing more turbulence than usual. The Dow Jones dropped about 830 points yesterday.
We wanted to keep you informed about why this is happening. But we also wanted to give you a timely reminder: the market will always have its ups and downs. But our diversified, long-term investment approach helps reduce the impact of times like these and recover faster.
Why is the stock market down? Two words: bond yields
As we reported in our recent market update, the US raised interest rates recently — standard practice in a healthy, growing economy. But with bond yields rising, making it more expensive for people to borrow to make purchases, the profit margins of US companies may get hurt (eg. if it’s more expensive to buy a car because of higher interest rates, a buyer may hold off on that purchase).
We’ve been enjoying the longest bull market in history. But many investors have been thinking about selling, in order to lock in gains before the market goes down (because a bull market never lasts forever). The interest rate rise apparently signalled to many investors that now was the time to sell.
Some market leading companies like Amazon and Netflix have seen even more significant losses in recent days. But keep in mind the long-term view: these companies have seen major share price growth in 2018. As always, investors need to keep an eye on the long-term picture. Despite what we’ve seen in recent days from the stock market, the US economy still appears to be strong.
Taking a balanced, long-term approach to investing
In times like this, it’s prudent for investors to stay the course. Volatility can feel uncomfortable. However, it can also present incredible buying opportunities, allowing investors to purchase good value at a discount. Rest assured, we are monitoring the situation and keeping a close eye on your investments.