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Why did the FTSE 100 crash on ‘freedom day’ Monday?

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It was so-called ‘freedom day’ in the UK on Monday. Most Covid-19 restrictions have been lifted. And we’re free to go and catch it in as many creative ways as we like. Oh, and the FTSE 100 is free to slump in response, as it promptly did. The index lost 168 points to end the day down 2.4%, at 6,840.

It’s impossible not to note that, at the same time, Prime Minister Boris Johnson and Chancellor Rishi Sunak are self-isolating, after contact with Health Secretary Sajid Javid, who has tested positive. It’s also hard not to notice that Covid-19 cases are rising again. Oh, and we face warnings from scientists and condemnation from opposition leader Sir Kier Starmer. And then we have the spreading ‘pingdemic’ with the government’s Covid-19 app thing telling huge numbers of people to isolate.

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Susannah Streeter, at Hargreaves Lansdown, said that “Investors’ confidence in the UK has dropped by 5% in July, when compared to June, a steeper fall than the 2% registered on average for regions around the globe.” She added that “The sharply rising Covid infection rates across the country, and concerns about fresh easing of restrictions, is likely to be behind the drop.”

And that’s after months of claims from Covid-19 sceptics that the lockdown is harming business. And we’d see things booming again just as soon as we’re allowed to cough and sneeze over whoever we please.

Europe and US too

It’s not just the FTSE 100 that’s being hit. In Germany, the DAX had a tough day, as did France’s CAC 40. The contagion spread to the US too, with the Dow Jones dropping a couple of percent in morning trading.

But let’s get on to the important questions for investors. What does this all mean for our investing outlook, and what should we do about it?

I reckon the answer to the first question is simple. It makes no difference. Well, it might affect short-term traders. But it should have no adverse effect on the kind of investors we champion here at The Motley Fool. I’m talking of long-term investors, with a horizon of five years or more.

FTSE 100 value

To us, daily Footsie movements should mean nothing at all. Even the 2020 stock market crash and the disruption it caused will very likely hardly be noticeable over a five-year period. Market weakness even does one good thing for us — it provides us with opportunities. Whenever I read headlines saying “Billions wiped off the value of UK shares” and similar, I rub my hands and think “I wonder what shares are even cheaper for me to buy now.

So that’s my take on the question of what to do about FTSE 100 ups and downs like Monday’s. Just carry on doing the same thing, evaluating investment opportunities, and being thankful for any dips that help me buy shares even cheaper.

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Views expressed in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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