By: Hong-An Phan
To sell or to buy, that is the question.
For many investors worldwide, particularly in America, this past Monday was nothing short of catastrophic. Millions may have opened their brokerage accounts, their eyes scanning their investment portfolios, only to find that the stock market has plunged and their shares have taken considerable damage.
But what is the cause of the decline? For starters, many have begun to speculate that a recession has begun in the United States. People have long feared this would happen due to the incline of interest rates to combat inflation. Additionally, the labor market has been on a decline with unemployment rising nationwide.
According to CNN analyst, David Goldman, “Goldman Sachs economists Monday raised the odds of a recession to one in four in the next 12 months.” A company of this prestige and reliability should be considered. With this in mind, it is clear that many have raised concerns over a recession in the near future.
Bloomberg reports that there was a loss of 6.4 trillion dollars in wealth. Investors no doubt saw rows of red percentages and downward arrows. Some may have hastily made poor decisions, others calmly approached the situation with a strategy.
During times like these, it is important to acknowledge the purpose of investing. For most, building a portfolio and gaining considerable funds is a long-term journey. Each investment made is one that should be growing and experiencing compound growth over the course of multiple years. It is normal to hold on to stocks through the ups and downs of the market.
Second, now is the time to return to a classic statement: “Buy low, sell high.” With stock prices having fallen, one could take advantage of this timeframe as a ‘sale’ and purchase multiple shares of stocks that they were considering for a cheaper price.
Economists encourage investors to hold onto their stocks and not panic. Many have begun selling their stocks in a frenzy after seeing the dramatic dip in prices, but the market is guaranteed to recover. Still, it is worth noting that major moves have been made in the finance world. For starters, Warren Buffet is said to have sold a majority of his shares in Apple, which has led many to do the same.
It is during these times that one should think like an economist. Stay calm, and view the numbers as such. The purpose of the market is to let money grow over a long-term timeframe. No money is lost until shares are bought or sold. And if a recession indeed looms in the near future, the stock market is in for a ride indeed.
Image by PiggyBank, Unspash.
Sources:
https://abcnews.go.com/Business/recession-fears-loom-economy-time/story?id=112588104#:~:text=The%20recent%20labor%20market%20cooldown,a%20series%20of%20rate%20hikes.
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