By: Chris Wright
On Monday, February 5th, the stock market took one of the largest drops it has seen since the European Debt Crisis in August 2011. CNN money is calling it, “One of the scariest days on Wall Street in years” in which multiple stocks dropped over 1,000 points in just one day. The largest single trading day dip occurred on Dow, dropping 1,600 points. When the books closed they rose back up to 1,175 points, but nonetheless, that is still an enormous loss. Stock holders and potential buyers were up in arms over the dramatic change, and as a result many people wanted to get rid of their stocks altogether, assuming they would only become a burden. People turned to The White House for a statement as to what they will do to fix this, but all they could say is that they, too, are concerned with the situation and will continue to work diligently to fix it along with boosting the future economy. However, stock experts are telling current stock holders not to panic because it was right around a time period in which a normal dip may occur. This means that it would be a good time to buy stocks that are lower than usual, and a poor time to sell because then the holder might receive less money than the stock would be worth in a few days.
The Street published an article by Brian Sozzi titled, “3 Reasons Not to Panic Over the Stock Market Losing 1,000 Points in One Day.” Sozzi collected information from Bank of America Merrill Lynch Economist Michelle Meyer with some promising trends. Meyer said that although the stock market dipped drastically, the economy was still “fine” due to “strong job numbers, robust consumer confidence, and cycle highs on the ISM Index.” (Stozi). Meyer pointed to the fact that if there was going to be a lasting drop, there would be factors shown in economic data that would forewarn.
Another reason not to panic is because the foreign exchange rate and the rate for gold did not see the same type of drop off, meaning that stocks were the only market experiencing the turmoil. Federal officials continued to let panic subside when they were asked about their opinions on what was to come next. New York Fed Chief Bill Dudley exclaimed, “The Fed does not respond to short-term swings in markets but only to sustained moves, which would threaten to filter back into the real economy.” Dudley is saying that the dip is not something the Fed is concerned about right now because they have no reason to believe it won’t be sustained. There is no reason to panic just yet. For those of you who are curious, continue to watch closely and listen to stock news daily to ensure the safety of the stock market.