Another week of bloody trade is in the books, culminating with Friday’s massive sell-off nearly across the board. The Dow plunged 391 points, or 2.4% in the session, as oil skidded below $30.
Downbeat retail sales numbers, as well as news that bellwether Wal-Mart (WMT) was going to close 269 stores worldwide, helped fuel the major selling.
What’s also largely fueling the sell-off is just the huge amount of fear out there among investors that the bull market has run its course.
Given the big selling this year (Dow and S&P 500 down more than 8%, Nasdaq down more than 10%), it’s not a stretch to think that a bear market is right around the corner.
Certainly, we’re in a full-blown correction (down 10% off the recent highs), as the broad-based measure of large-cap domestic stocks now is down about 12% from its May 21 record high of 2,130.82.
Perhaps more troubling is a fact we pointed out in today’s Morning Edition. That is, that the average stock in the S&P 500 is down 20%. In fact, some 50% of S&P 500 stocks are down more than 20%, and officially in a bear market.
If you’re worried about this market (as we all are) then you need to check out today’s Morning Edition, as well as Wednesday’s Afternoon Edition on just what it will take for the markets to stop the bleeding.
Now, for the remainder of today’s issue, I want to put my astute readers in the spotlight, as we were flooded with some outstanding feedback on yesterday’s Afternoon Edition, “When More Than Half Have Less than $1,000.”
This article really resonated with you, and here’s just a sample of some of your fantastic (and voluminous) feedback on my take on why:
People have so little money …
Hoping for a presidential candidate to “fix” things is an exercise in futility … and
The only solution is for people to take extreme ownership.
The person who starts smoking pot at 12, drops out of school at 14 and is a single parent by 16 has little cause to blame capitalism for a less-than-stellar standard of living. The same goes for spending more than you earn on non-emergency items. (I do not count a plasma TV as an emergency item.)
The only places where [Washington] policies earn blame are by setting the example of spending money the government can’t cover by reliably predictable income estimates …
You get what you pay for, unless you are the government, where you get what you promise to maybe pay for someday.
There are many reasons why people are broke and have nothing saved, and it doesn’t mean they are irresponsible. Americans have been so brainwashed by the cult of “individualism” that we are forgetting to be kind, to help out our fellow man, and that society is made up of people working together, not just individuals afloat on their own private islands.
Brad response: I agree with “Bookworm” that there are many reasons why people are in bad financial shape. However, the answer to that situation cannot be found through others — i.e., via the “outside,” and especially not by politicians. The solution to an individual’s problems must come from the individual. If that suggests a “cult of individualism,” then perhaps that cult is on to something.
At least part of the misfortune of America comes from a lack of stability within families. It is difficult and more expensive to face the trials of life in a house divided. The cause of this lack of stability has its roots, I think, in the social revolutions of our time. However, I’m sure the economic policies which make jobs scarce and less-lucrative don’t help.
Outstanding article, Brad. While it is true that the policies of governments have hindered business and job formation, and there are unfortunate people who have a devastating setback (accident, illness, etc.), I agree the main reason is individual attitudes.
Too many Americans have lost the sense of personal responsibility, and they make things worse by electing (and re-electing) politicians who promise them relief from the hard choices and efforts that are needed to get and keep a good job, start building savings (i.e., capital), and make lifestyle choices that will at least give them a fighting chance of overburdening the broken health system.
I think your reasoning is sound as to why Americans have so little capital. However, in this current climate, individual effort is severely hampered by idiotic government policy and market intervention. This government (and predecessors) is far too interested in self-preservation and panders to big banks, insurance companies and big pharma.
The reason that the people are broke is because “The Government” be it Federal, State or Local are sucking the life out of all the people in the middle class to pay for their exorbitant programs. Welfare and greed leave the working man nothing to work for. Greed by these people is the problem, not greed by the corporations and companies.
Brad response: “Greed” as it’s commonly, and incorrectly, thought of (i.e., accumulating wealth at the expense of others) is not healthy. But there have always been, and will always be, greedy individuals, corporations and politicians.
The fact that others are greedy, corrupt, selfish or unethical still does not alter the fact that if a person is broke, only that person can act to change his/her circumstance.
No matter what the reasons, there is still no abdicating the fact that individuals must act to make their lives rational. And, the better their decisions, the greater the likelihood they’ll find themselves far away from the “broke” category.
Finally, I’ll leave you this reader response that nicely sums up my stance on this issue, as well as the thoughts of the overwhelming majority of responses.
I fully agree with your article. It all comes down to personal responsibility, which we are sadly lacking in more ways than just financial responsibility. Unfortunately, too many individuals want to blame anyone but themselves for their situation, whether it be financial troubles, legal troubles or whatever. We need to wake up and take responsibility for ALL our actions in order to make this country great again.
Thursday’s rally provided only temporary relief to the new year’s selling. Not only did those gains get wiped out today, but the S&P 500 took out its August low and is at October 2014 levels. The Nasdaq saw its worst losses since 2008.
• The Dow has lost 8.2% in just the first 10 days of the new year. That’s roughly 1,400 points, taking the index just below 16,000 in today’s session.
• The stock market could fall another 10%, according to BlackRock (BK) Chairman Larry Fink. With stocks already down 10%-plus, this would put us squarely into bear-market mode.
• Fink also said oil could test $25. Considering that WTI crude dropped 5.7% today to $29.42 per barrel, that’s not a far drop. One energy expert even says oil could quickly plunge to less than $5 a barrel … and this massive plunge in oil prices will change everything.
• Wynn Resorts (WYNN) provided a dot of green in a sea of red. Shares popped 13.3% on earnings that showed better-than-expected revenues in Las Vegas.
• Wells Fargo (WFC) and Citigroup (C) reported earnings beats, but both saw their shares sink amid the broader market bloodbath. They lost 3.6% and 6.4%, respectively.
Good Luck and Happy Investing,
Uncommon Wisdom Daily