We’re a little more than a week removed from what has been dubbed Black Monday. On Aug. 24, the Dow Jones Industrial Average plummeted around 1,000 points in early trading, with the panic subsiding to “only” a 500-point decline on the day.
Since then, it has been the same kind of rollercoaster investors have been riding for just about all of 2015.
Monday was another ugly day for the market, for instance, with the S&P 500 sinking almost 3% on the day — a drop that was not surprising (big drops often need to be re-tested) but still unwelcome considering things appeared to be getting better for U.S. stocks. Last week, the index actually turned out a five-day gain even in the wake of Black Monday’s damage.
This week’s blip seemed to come from ongoing concerns about the global economy. China released weak manufacturing numbers and then came steep declines in the Asian and European stock markets. Hours later, U.S. investors followed the global trend lower.
While there are plenty of global concerns floating around, I remain optimistic about the U.S. stock market — and you should, too.
The Fundamentals of the U.S. Market Haven’t Changed
In fact, even back on Black Monday I was largely optimistic about the prospects of domestic stocks. I mentioned this when I appeared on CBS News that day, and, with another week of ups-and-downs in the books, my thesis remains the same.
There is a lot to like about the American economy, which is why investors need to remember that the stock market is a long game for most. If you’re funding retirement, for instance, you’re looking for strong, steady companies to provide a profit over a long time range.
With that end goal in mind, it’s important to not get shaken out by the inevitable blips.
In fact, the strength of the domestic economy is likely part of the reason there’s so much panic right now. Since the Federal Reserve turned the printing presses on, bringing rates dramatically down, investors were spoiled with seemingly never ending upward momentum and low volatility.
The recent volatility, though, isn’t a reflection of any fundamental change in the economy. As a result, savvy investors will use such blips as an opportunity to find value that will pay off in the years and even decades to come.
Zooming in a bit more, the U.S. has actually created entire new, strong sectors since the Great Recession. Cybersecurity leaders like FireEye (FEYE), healthcare picks like Johnson & Johnson (JNJ), Merck (MRK) and even biotechs focusing on therapeutics, like Regeneron Pharmaceuticals (REGN), still boast great long-term prospects even in the face of this year’s rollercoaster.
If you have money set aside right now, take advantage of this opportunity to get into long-term picks at a reasonable entry point. Mega-trends haven’t changed since Black Monday, the fundamentals of the American economy haven’t changed since Black Monday, and your overall investing thesis shouldn’t have changed.
Put another way, investing is like collecting wine. It takes time for these picks to get sweeter, but the best investors will be patient, wait out the bumps and be rewarded with something smooth, delicious and of top-shelf value on the other side.
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