Since the 2016, the stock market has been on a wild race to the top of the charts. Both the NASDAQ and Dow have increased by an estimated 40 percent over the past two years. However, this past week leading into February, the Dow has slipped more than it has over the previous two years. But what exactly does this indicate for the average person who is not heavily invested in the stock market?
According to the economists, the stock market has always been subjected to cycles of highs and lows. It has been in an upswing for such a long time now that a dip in the gains has tended to shake investors who are unsure how to respond to changing conditions. In spite of the fact that there has been good news concerning job gains and increases in wages, the good news for the average person translates into uncertain news for investors and banks. It may seem counterintuitive, but a healthy pay check and more confident consumers tends to lead to higher interest rates which then tends to lead to banking institutions less likely to make loans to those who are less than financially stable.
When cash is flowing more freely, the feds are inclined to tighten the purse strings by raising rates which tends to slow down the economy by degrees. Walking the investment highwire is trickier than most consider. The experts expressed some relief that the market has cooled somewhat as this may keep it from increasing to the point where the bubble must burst. Indeed, the stock market bubble is becoming increasingly unstable as investors are starting to demonstrate by the rapid sell-off that occurred earlier this week. Though about half of the losses were gained back a day later, the dip has not recovered fully and may indicate that the economy is headed for a downturn once again.
Employers often react to this changing market by either refusing to hire more workers or, worse, thinking of letting some of its workforce go in order to preserve its profit margin. Companies are in business to make money, and when things start to slow, the first reaction is often to reduce labor cost. Unfortunately, this leads to consumers having less discretionary income and thus slows spending. This in turn often leads to further losses in the stock market as it shows less consumer confidence.
Keeping the economy moving in the right direction is the ultimate goal of every president. The state of the country’s finances are often seen as a direct reflection on the job that that the commander-in-chief is doing. In reality, the president has little effect on how well the stock market performs as it is more business and market driven.
For now, it may be prudent for the average worker to invest modestly in his retirement and pension plans and to tighten his or her belt by degrees. The road ahead may get a bit bumpy until the market figures itself out.
Writer Bio: Angela Mose
I am a mom of 7 who has successfully homeschooled for 20 years. I was married for more than 25 years and have recently started my life over. I have a passion for writing and music and when the two can be combined, it is utopia. A Maryland native, I am planning to relocate north in the near future and will continue to strive to learn and experience new things on a regular basis. I am fortunate enough to be able to work from home while exploring new ways to increase my knowledge and skills and help improve the lives of those around me.