Today, the stock market made its first big decline since Trump became president. The Dow and S&P 500 indices made their largest single-day decline since September 9. The Nasdaq 100 made its biggest single-day decline since June 24. These indexes measure overall health of the stock market, so when they decrease, most stocks decrease in value, too.
If you’re an investor, you probably looked at your portfolio today and noticed you lost quite a bit of money. Despite your first instinct to panic and sell everything you own, this is the absolute last thing you should do. These noticeable drops happen all the time, though they haven’t happened in a while. Yet unlike other anomalies in your life, today’s dip happened for a few very good reasons:
1. People are nervous about Trump.
We don’t need to get into the numerous reasons why people on both sides of the aisle are weary of the current administration. Your friends and family probably talked you to death about everything. Yet an ineffective president or a president under scrutiny won’t be able to delivery the sweeping, pro-Wall Street reforms promised. Nor will he be able to institute an effective tax policy that could potentially help investors and (big) businesses alike. Many investors feel that if the president can’t accomplish these feats, the market won’t be able grow as it could/should.
2. The retail and industries are falling on hard times.
JCPenney, Sears, Macy’s, and countless other American retailers are closing hundreds of stores. Some retailers are going out of business, especially those based in malls. The retail market as a whole is in a years-long decline that it might not escape. These flailing companies are responsible for billions in stock and millions of jobs. If they go out of business, shareholders could lose their money and many tax-paying citizens will be out of work.
The auto industry isn’t doing so hot, either. Ford announced today they were getting rid of 1,400 jobs, or 10% of their workforce, to deal with declining sales and a declining stock. They’re not the only ones struggling either. The entire industry is currently seeing the first sales slump since 2009. Many auto stocks are down since the beginning of the year, which subsequently put a damper on countless portfolios.
3.The market was unusually high for a while.
The Dow, Nasdaq, and S&P 500 indexes hit record highs since Trump became president. These indexes, which measure the overall health of the market, were high because of faith in Trump’s future actions, the future of the economy, and a whole bunch of speculative reasons. Now, faith in Trump is rather low, certain facets of the economy show signs of future declines, and people are a little less positive about the market. After all, the market can’t keep breaking records forever.
4. Unlike many things right now, this is normal.
The stock market goes down and the stock market goes up. A healthy stock market has days, weeks, or even months of declines. The stock market historically increases, but it has to decrease before it can increase even further. If the stock market keeps making major decreases over years in ways that mirror major recessions/depressions, then it’s worth worrying.
5. It will probably happen again.
If people are uncertain about Trump and the overall state of the market today, they’ll likely feel the same way tomorrow. If news of the Trump administration quiets down or declining industries post an unexpected turnaround, the market could go back up. The market could also go back up for lots of reasons. It won’t, however, stay down forever, so just chill.
Should you sell everything you own and quit investing?
Don’t even think about it. In fact, you might be able to get your stock of choice for cheaper, especially if the market continues to decline. Once the market goes back up — which will totally happen, as it always does — your initial investment could potentially become worth more.
Until then, ride this one out and don’t stress.