Picture the last time you were on a roller coaster. Scary as that big downward plunge was, if you were brave enough to open your eyes you’d at least feel confident you knew where the bottom was. You could get a feeling for when the screaming around you would abate and you’d finally be able to take a breath.
But investors in equities since the beginning of the year have had no such opportunity. On Monday the stock market offered no bottom – or mercy. The Dow lost 178 points, and the S&P 500 dropped one and four-tenths percent. The Nasdaq, down one and eight-tenths percent that day, is now off fourteen and a half percent for the year.
Welcome to Paper-Asset Land! “It’s just a stampede of selling,” laments Art Hogan, chief market strategist at Wunderlich Securities. Much of the fallout here in the states can be attributed to the price crash in the oil market. Not coincidentally, the stock prices of energy companies are also sliding big time. In the shadow of bankruptcy, NYSE company Chesapeake Energy, closed down thirty-three percent on February 7.
But the stock market bust was by no means limited to the United States. On fears of a weakening oil market and continued economic troubles in China, Japan’s Nikkei Index dropped over five percent, with the yen losing ground to the dollar. Australia’s S&P/ASX lost almost three percent, and markets were depressed in Indonesia, Thailand, the Philippines, and New Zealand.
Meanwhile, central banks worldwide have been attempting to jump-start growth by devaluing currency and cutting interest rates to unprecedented levels, with Japan venturing into negative interest rates. But journalist Steve Birr suggests the strategy in Japan has failed to calm the public’s panic about a looming recession.
Neil Irwin at The New York Times also points out that the questionable stability of emerging market investments factor into the possibility of another recession. Investors in emerging countries in Asia, Africa, South America and Eastern Europe are about to discover how much the apparent growth in these countries was buoyed by waves of credit as opposed to “real, durable economic activity.” Irwin also suggests the drop in these countries’ currencies against the dollar could exacerbate the global debt crisis.
Sliding stock prices, global debt, currency devaluations, dangerously low oil prices – clearly these are problems that will continue to hit home as you attempt to build your personal wealth. The common denominator? They’re all external forces over which you have no control – yet they could potentially control your future
But you can implement a positive and profitable strategy to keep the global financial mayhem away from your door. If you’re still fortunate enough to have paper profit in any of your stocks, grab some of your money off the table and use it to start building your tangible asset allocation – the investments that stand firm against outside forces.
Also think seriously about how vulnerable your retirement funds are. Dialing down the risk through a gold IRA rollover that lets you include physical gold and silver along with your other investments may be the key to your future security, as well as your current ability to sleep peacefully…