Stock market plunges amid recession fears

Japanese stocks suffer worst day since 1987 as global rout intensifieshttps://t.co/RNgLWKWCF8

— Gunther Schnabl (@GuntherSchnabl) August 5, 2024

The stock market plunged on Monday amid growing fears of a recession, with the S&P 500 closing down 3%, the tech-heavy Nasdaq composite dropping 3.4%, and the Dow Jones Industrial Average falling 2.6%. This marked the biggest daily drop for the S&P and Dow since September 2022. Despite the worrying state of the market, experts advise investors to stay the course. Kristina Hooper, chief global market strategist at Invesco, said, “Hold tight. For most investors, they have a long-time horizon. It’s not measured in months.

Asian shares tumble as traders brace for global volatility
Breaking: the economyhttps://t.co/NXXL8xnkKJ

— Heike Lehner (@heikelehner) August 5, 2024

As #stocks bounce back, led by #Japan, many will be tempted to dismiss the #volatility of the last few days as typical of the wild west nature of less-liquid, trader-led #markets.
A better approach would be to focus on the importance of restoring the dual anchors of solid #growth…

— Mohamed A. El-Erian (@elerianm) August 6, 2024

And so while it’s hard to do, putting on blinders is perhaps the best single decision investors can make for their portfolios.” Monday’s selloff followed a newly released report that stoked recession fears.

"Wild" doesn't come close to describing what happened to the VIX today:
After spiking to 66 this morning from below 20, it halved intra-day
and is now settling just above 30.#economy #markets #econtwitter pic.twitter.com/ngJ8wYH2vo

— Mohamed A. El-Erian (@elerianm) August 5, 2024

U.S. hiring slowed as employers added 114,000 jobs, a steep decline from the 175,000 jobs economists estimated were added last month.

Stock market drops raise recession concerns

The unemployment rate was 4.3%, the highest since October 2021 and up from 4.1% in June. Claudia Sahm, the former Federal Reserve economist behind the namesake rule, told Bloomberg Television that while it is unlikely the country is in a recession, “we’re getting uncomfortably close to that situation.” Scott Wren, senior global market strategist at Wells Fargo, indicated that recent economic indicators raise the risk of a recession, and the odds of entering into one within the next 12 months are increasing. For those concerned about their 401(k), experts say the best course of action is to ignore momentary dips and keep investing. Sam Stovall, chief investment strategist at CFRA Research, said, “You definitely would not want to stop adding money.” If investors feel compelled to take action during the dip, Scott Wren from Wells Fargo suggests that increasing investments while prices are low can be a smart move. “This is an opportunity,” he said. “If anything, you should boost your percentage that you’re putting in when the market is down because over time – two, three, five-plus years – it’s very likely to work out.” Ryan Detrick, chief market strategist at Carson Group, pointed out that market drops of at least 10% from a recent high, also known as a correction, happen about once a year. “For longer-term investors, it is times like these that help you reach your goals,” Detrick said. “Buying when things go on sale is always a good strategy, even if it feels like the wrong thing to do in the moment.” While the current market volatility might be unsettling, staying the course and potentially increasing your investments during downturns can ultimately lead to greater financial security in the future.