Thanksgiving week, 2018 was an interesting one for the stock market. The S&P dropped 3.8% for the week putting us officially into a market correction. We closed the week down 10.2% from our last market high. This Thanksgiving week was the worst week since 1939. Monday, November 26, 2018 did see the S&P rebound (up about 41 points or one and half percent), but it has been a wild ride.
Why the Market Drop?
Investors are concerned about rising interest rates and tariff/trade talks. Oil has been down seven weeks in a row, dropping more than 20% in November. The EU is in the midst of deciding how Brexit is going to work out and there are additional political challenges in Europe. Tech stocks are down significantly; apparently due to reduced guidance in future earnings. Doesn’t pose a pretty picture, does it?
Things to Consider
Obviously, no one can predict the future; however, there are a few things to consider about what’s going on.
- Thanksgiving week had light trading volume. That trend usually happens over the Thanksgiving holidays. Light volume also tends to magnify pricing trends (down in this case). The decline we experienced may not be as significant as we see.
- Black Friday shopping was strong. Online purchases were up about 28% over 2017. Employment data may mean that consumers have discretionary money to spend for Christmas.
- The G20 summit is approaching and trade is sure to be a major topic. President Trump and Chinese President Xi are scheduled to discuss trade topics. The fruitfulness of these discussions is definitely uncertain; however, we’ll have to wait and see.
- Further economic data is coming out this week: consumer confidence, GDP, new home sales, jobless claims—let’s see what happens.
The Bottom Line
Remember why your investment goals were established. You established an asset allocation with your risk tolerance and the long term in mind. See if your personal circumstances have changed before making drastic portfolio changes.