By Ryan Velez
Uh-oh. The stock market took a colossal plunge on Monday, 1,500 points throughout the day, finally losing 1,175.21 points placing the stock market in correction territory. According to CNN, the drop in the market made it the single worst day ever for the Dow since August 2011. At this point, you may want to panic, but Kemberley Washington, CPA, put together an article for Black Enterprise explaining what you can do to react.
For one, this is a culmination of several different things coming together. “First things to consider, the economy is strong and healthy. A recent jobs report indicated wages have increased approximately 2.9%, up from the previous year and more than 200,000 jobs were added to the workforce. In addition, the unemployment rate has remained steady overall (although black unemployment went up to 7.7%).
Because of the healthy economy, the Federal Reserve is expected to raise interest rates throughout the year. When interest rates increase, the cost of borrowing increases as well. As rates rise, stock prices begin to fall.
Also, bond yields have risen, which could be disturbing news for stocks. Investors are likely to pull money out of risky investments such as stocks and bonds when there is turbulence in the market.
Lastly, the Federal Reserve has just sworn in the new chairman, Jerome Powell, to replace Janet Yellen. This also brings slight uncertainty to the market,” she explains.
For Black investors, there are two main things to do: stay the course on retirement and make sure your assets are diversified. “You have to understand your long-term purpose. If you are investing in the stock market for retirement and it will be several years or more before you will need the money, then you should stay put and keep the money invested. The market has seen corrections and declines before, therefore it is important to stay the course. And, of course, this will depend on your risk tolerance, but if you are a younger investor, you should consider investing in a portfolio that consists of a higher percentage of stocks and a smaller percentage of bonds.”
She adds this will be a good time for you to check in with your financial advisor to discuss your concerns and see if there are any sensible steps you can take.