Even though the U. S. financial markets were closed on Monday, for the Martin Luther King, Jr. holiday, Europe was mostly down, but only slightly, and Asia was mostly flat; however, the Pacific looks mostly green at this time, early Tuesday afternoon. Developing markets that are heavily dependent upon commodities, however, are still dropping, as oil had moved below $30 per barrel a couple of days ago.
It is important to consider that the financial markets are not inhabited by a homogenous group of investors; rather, a large number of people dwell there, from various backgrounds, and with different risk tolerances, time horizons and future goals. Thus, the multitude of participants is moving their money in different directions. So, when we speak of “The Markets,” in effect, the topic refers primarily to the overall stock market, and the actual result, at the end of the day, is the Net movement, between all of the different individual players.
I have commented in recent blog posts that the melt-down over the past two weeks is because many in the West have placed too much confidence in China as a bastion of economic accomplishment. However, China only represents $2 trillion of the overall $60 trillion global trade marketplace, and its economy continues to be manipulated by the Communist Central Committee. Many global investors have just placed too much trust in an over-rated House of Cards. But being pragmatic, what should investors be doing, going forward?
As always, consider what your personal Investment Plan has been, and whether changes are needed. By that, I don’t mean that you should panic and sell-off a large portion of your portfolio. Rather, at any major turn-of-events—changing jobs, retirement, or a significant market flux—it’s a good time to consider where you are, where you want to be and what your Investment Time Horizon is. Discuss these things with your spouse, and anyone who provides you with knowledgeable investment advice.
I can’t tell you how many times there has been a significant market change since I entered the securities business, back in January of 1973. During each of those changes in market direction, many investors got out, and many others entered. Either move could be just a portion of your portfolio, in either direction. The options are clearly to either get out of the market—take your money and feel safe—or to get in at the assumed bottom; but, that would only make sense if you are right. And, as always: the beat goes on!