August 5, 2024
Everyone is talking about the wild swings in the stock market and I’m sure you’re also hearing the “r” word — recession. So — just take a breath and hang on so I can shed some light on what’s happening.
First – I am not a financial analyst but I can report about the news and the facts that have lead to what’s happening right now. And it’s important for you to watch this whole video because the information I’m about to give you will help you form your own opinions about what’s happening so you have some context when you do start listening to the economists and financial experts and start figuring out what you should do with your own money.
Ok – I’m not going to talk about specific stock market numbers because they fluctuate every minute. But it’s fair to say – generally – the market has dropped a lot since Friday. But to understand this drop, you have to understand where we’ve been….
This is the last five years of the Dow Jones Industrial Average –the stock market– you can see it’s trending up – except for these two dips.
One was during the pandemic in march of 2020 when the Dow dipped below 20,000 and the other was in September of 2022 when it dipped below 29,000. But generally you can see that’s all still in the green.
But then we had a massive peak – in July of this year – when the stock market hit a record high of 40,000. That was probably a good day for your 401k.
But now let’s look at what’s happened in the last five days – you can see this drop off specifically today. And that looks dramatic right? It’s red, down more than 2%. It looks scary. But when you put that same drop off from today in the 5 year overview – this is it. Yes – it’s absolutely coming down – but it doesn’t look as dramatic in context.
Now – let’s talk about what’s causing this drop off.
This Labor Department’s monthly jobs report that was released on Friday. It found US businesses added 114,000 new jobs to their payrolls in the month of July. And found the unemployment rate is now sitting at 4.3%. So you’re probably thinking – those must be terrible numbers if the stock market is dropping so drastically. But that’s the thing – these aren’t horrible numbers. 114,000 new jobs in a month is nothing to sneeze at. But what’s happening is – 114,000 is significantly less than the extremely strong jobs numbers we’ve been seeing for the last year when we were seeing 200,000 or 300,000 new jobs added every month.
The other important number in that Friday jobs report is the unemployment rate. Between 2022 to April of 2024 we had unemployment in this country below 4%. Historically low. Since April – it’s been slowly creeping up – well on Friday the Labor Department reported unemployment is now sitting at 4.3%. For the record – this enormous spike in April of 2000 was peak pandemic when unemployment reached almost 15%.
So – that not so hot jobs report from Friday – coupled with the fact that the Federal Reserved decided not to cut interest rates last week and some weakening in tech stocks sent not just the US market but also the global market into – for lack of a better term – panic or fear that the US economy – the world’s largest economy — is slowing down. But that slowdown is what the federal reserve wanted to see to get inflation down.
So what does this mean for you? If you don’t have your money in the stock market – like lots of Americans? It means nothing for you. But if you have a 401k or other money in the market – you may want to reach out to your financial advisor to talk about what’s best for you. This also means – it is almost certain that the federal reserve will cut interest rates for everyone in September. The question is no longer if they’ll cut rates but by how much they’ll cut rates. We’ll know that answer when the Fed meets again in mid-September.
Regardless of what you decide to do, do not panic and do not listen to unqualified people on the internet.
