What to Do When the Stock Market Drops
History books and record books will study the first half of 2020 with intense interest. From an investor’s perspective alone, we’ve had a number of major market events that we’re still grappling with, and ongoing issues have injected huge amounts of uncertainty into the markets. A global pandemic, caused by the coronavirus, led to the brutal severity of the early spring pullback and the widening disparity between the equity and bond markets. The global economy went into free-fall; the staggering number of jobs lost in so short a time is without precedent, and many small businesses are under strain. And what happened next? A record-breaking market rebound despite a resurgence in virus cases and no vaccine as of yet.
That sharp rebound is reflected in the CNN Money Fear and Greed Index, which jumped into Greed territory compared to Neutral several weeks ago, indicative of the emotion driving the market. Times of Greed or Extreme Greed can be a precursor to more volatile times ahead, but since one data point can’t paint a full picture, it’s wise to examine a multitude of data points for confirmation.
