Yesterday, the FTSE 100 dipped by a little over 2.3% across the trading day. While we investors would obviously prefer an infinite increase in our shareholdings, there is once again no reason for us to panic. Whatever ‘signals’ you might be hearing, the stock market did not crash on Monday!
The term “crash” usually applies to occasions in which the major stock market indexes lose more than 10% of their value in a relatively short time period. Think the dot-com bubble of 1999-2000. Black Monday in 1987. The end of the Roaring Twenties in 1929. And, yes, the Covid-19 crash of 2020.
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Similarly, a “correction” is usually defined as a decline of more than 10% from a recent high. With the highest point the Footsie has reached in the range of a year being 7,687 — and yesterday’s close of 7,216 — we’re not in market correction or crash territory.
I’m not burying my head in the sand as I write this, believe me. I’m fully aware of the concerns over inflation, a possible looming recession, and potentially higher interest rate increases. Not to mention the worries over coronavirus lockdowns in China, and the ongoing conflict in Ukraine. I know all these factors are weighing on markets and share prices.
My point is that too many commentators or news outlets are depicting this as a fatal disaster for our finances. What they’re doing — and what we aim to avoid, here at The Motley Fool — is fear-mongering.
Just look back at the examples of market crashes I listed in the second paragraph. In each and every case, stock markets have bounced back. I’ve got little doubt that the FTSE 100 (and other UK indices) will not only fully recover but thrive in future years!
Why? Because, historically, that’s what stock markets do.
So my advice is to block out the noise. If you’ve bought Foolishly (and not foolishly), then you’ll be a shareholder in many well-run companies that have all the qualities necessary to ride out market volatility. And perhaps more to the point, market dips like these present buying opportunities for savvy investors!